MNREE Review

Antitrust Elements

Although antitrust can and does take several forms in real estate, the central elements of an antitrust violation involve a contract, a conspiracy between or among competitors to unreasonably restrain trade, or a combination of these things, as the diagram shows. If these elements exist, there may be a violation of antitrust law.

Customer (DRHP)

- Disclosure of material facts - Reasonable skill and care - Honesty and fair dealing - Prompt presentation of all written offers and counter-offers Licensees provide expert guidance and exercise discretion as part of their services to clients. The level of service licensees may provide to customers includes ministerial acts—acts which do not require the licensee to give expert guidance or exercise discretion and which cannot be construed as violating the licensee's duty of loyalty to the client. Licensees may perform ministerial acts on behalf of both clients and customers prior to, during, and following a real estate transaction.

Where to Find Legal Descriptions Part 2

A legal description in a deed helps correctly and accurately identify the property being transferred. While the street address is fine for an MLS listing and other less-formal uses, because of the weightiness and finality of transferring or encumbering title to real property, a formal legal description is required. The legal description will generally be in one of four forms (although the form used may vary by area): - Metes and bounds - Description by reference, lot and block (plat of subdivision) - Monuments - Rectangular government survey system

Let's start by defining exactly what a deed restriction is. Which of these describe a deed restriction?

A private agreement that impacts the use of the land AND a covenant. ** A deed restriction is a private agreement that impacts the use of the land. A covenant is a type of deed restriction. It's not your role to know the restrictions of each neighborhood, but you should know if a covenant exists and is enforced.

Title vs Deed

A title and a deed are two different ways of describing the same thing: property ownership. While a title is the legal concept of ownership, a deed is the physical document that conveys and describes that ownership Although a buyer obtains both a title and deed at the end of a transaction, the two terms aren't synonymous. Title is a legal right to use, possess, modify, and transfer a property. It's not a document, but a legal concept. The deed is the document used to communicate that concept.

The MCIOA - Minnesota Common Interest Ownership Act

By default, associations created after June 1, 1994 are automatically required to participate in the MCIOA. The same goes for condos, regardless of when they were formed. Single family or townhome associations created before June 1, 1994 must opt in to MCIOA participation. This involves amending the original declarations to allow for MCIOA regulation. The MCIOA helps fill in the legal gaps that some of the smaller, less savvy communities may have left in their declarations and regulations when they formed the association. MCIOA jurisdiction regulates: - General association administration - Common area usage - Activity that may endanger the health, safety, or welfare of residents or cause damage - Pets - Exterior alterations or improvements - Articles of incorporation, declaration, and community bylaw enforcement

Land Use Control in MN: Minnesota Building Codes

City plans tell us what kinds of buildings we need. Zoning tells us where to put the buildings. Building codes tell us how to build them so that they don't fall down—that's pretty important.

Property with ownership by more than one person is known as ______.

Co-ownership

Which one of the following says that real estate acquired by either spouse during a marriage (in most cases) is considered community property?

Community property rights

What Are Community Property Rights?

Contrary to common belief, community property doesn't have to be titled in both spouses' names. In states that have community property rights, all property acquired by either spouse during their marriage (with the exceptions of property that was gifted, inherited, and in some cases the result of personal injury recovery, which are all considered "separate property") is considered community property regardless of which spouse's name is on the title. Both partners may also have other properties purchased before the marriage that they own individually (in severalty), but any property purchased during the marriage is owned equally, regardless of whether one or both spouses are on the title. Nine states have community property rights: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Non-lawful possession after the expiration of a lease is called ______. Estate for years Leasehold estate Estate at will Estate at sufferance

Correct answer: estate at sufferance

Terminating Tenancy

Do the brothers meet the requirements for this type of ownership? There's more than one owner, so we know it's not estate in severalty. Which of the remaining do they represent? Bring legal action to have the property partitioned. You got it! A tenant may bring legal action to have the property partitioned (or divided equitably). Each tenant would receive the title to their portion of the property. If the property cannot be equitably split, the court may order the property be sold, and then divide the proceeds from the sale accordingly.

Freehold Estate

Home ownership for an undetermined length of time.

You're representing Jeff and Sherry, first-time buyers who have had an offer accepted on a townhouse. You just learned that Jeff was just laid off and the current lender won't provide financing. What should you do?

Inform the seller's agent about the change in circumstance.

Tenancy in Common

Jack, Jerry, and Joe are brothers. Their parents die, leaving them the family home. Each holds an undivided interest in the entire property, and there is no right of survivorship. If one of them dies, that brother's share will go to whomever he's stipulated in his will. What ownership type describes Jack, Jerry, and Joe's situation?

Jamie and Pat are interested in purchasing property near a lake. Which ownership type is NOT recognized in Minnesota?

Jamie and Pat owning the property as tenants by the entirety.

Janet and Frank: Homestead

Janet and Frank are living the dream. They've purchased a lovely home in St. Paul for $425,000, which is now their primary residence. They were excited to hear that they can homestead their property in order to exempt a portion of it from property tax. If all goes well and they qualify, what is the amount they will be able to exempt from property taxes? Answer: Up to $390,000 **That's right! Remember that there are limitations on the size of the homestead property. The homesteads can be claimed for properties 160 acres or less.

LLC Benefits

Jeb decided to go with an LLC instead of a corporation. What are some benefits an LLC offers Jeb? Shields personal assets from liability: benefit Commingles personal and company assets in terms of liability: not a benefit May not have to file a separate tax return: benefit

Thelma, Sidney, and Shirley meet at the Crusty Acres Retirement Center. Tired of unsalted oatmeal and an 8:30 p.m. curfew, they decide to "ditch this joint," pool their resources, and buy a "happenin' little condo uptown." Because they want to ensure that no one is displaced from the condo in the event of one owner's death, they decide to hold title in such a way that if any of them dies, the others own the deceased person's shares. How should they hold title?

Joint Tenancy

Siblings Julia and Gene are co-owners of a small retail building in which a tanning salon is currently operating. Gene really wants to leave his ownership interest to his son when he dies, but the way in which they own the property doesn't allow him to do so. What type of ownership do they have?

Joint tenancy

What Is a Timeshare?

Multiple shared ownership or multiple shared use of a piece of real estate. ** A timeshare is a piece of real estate in which there is a multiple shared ownership or multiple shared use.

Antitrust Enforcement

Nationally, the FTC and the Department of Justice's Antitrust Division collaborate to investigate suspected antitrust violations. At the state level, offices of each state's attorney general enforce state antitrust laws and assist those who claim unfair competition.

Instead of competing in each other's territories, agents with one firm agree to segment the marketplace and refer clients to one another who are outside of their assigned market area. Is this market allocation?

No

Types of Government Powers

PETE P = Police power E = Eminent domain T = Taxes E = Escheat Taxation Legal power: Lien Owner compensated? No Eminent Domain Legal power - Involuntary title conveyance for the public good Owner compensated - Yes "We want it, we take it. However, we will pay you for it, and we'll pay fair market value, too." This could be the motto for eminent domain. Escheat Legal power: Involuntary conveyance at death when no will exists and no heirs or creditors are found Owner compensated? No Police Legal power: Governmental authority to do what's right for the public good Owner compensated? Maybe* *Owners are not entitled to compensation as they are with eminent domain

Limited or General Partnerships

Partners participate in partnership management: general partner Silent partner: limited partner Personally liable (both jointly and separately) if partnership debts exceed partnership assets: general partner Not liable if partnership debts exceed partnership assets: limited partners Receives return on investment before other partners: general partners

Life Estate Terms

Sarah inherited Hank's estate, but failed to pay property taxes on the condominium, causing her eventual loss of the condo: Act of waste. An elementary school will receive title to 20 acres of land upon the death of the life tenant, Teddy Jr. The elementary school is the: Remainderman. Papa conveyed 20 acres of land to Teddy Jr. for life. Upon Teddy Jr.'s death, the land will go back to Papa: Reversionary interest.

Estate in Severalty

Sergei has just purchased his first house. He owns it; no one else does! No one tells him what he can do with the house—he decides. No one shares his house with him, or holds any interest in the house (except his lender, of course). What ownership type describes Sergei's situation?

Equitable Distribution

States that aren't community property states are instead considered equitable distribution states, this includes Minnesota. When it comes to the distribution of marital assets as a result of divorce or annulment, what does equitable distribution mean?

How is procuring cause related to a protection clause?

The period of time in the protection clause is only applicable if the licensee is the procuring cause.

Whereas with tenancy in common, only the unity of possession is required, joint tenancy requires several unities. Which of these unities are required for joint tenancy?

Time, title, possession, interest. All four unities are required for the joint tenancy form of co-ownership. Although we're discussing the four unities here, keep in mind that they do not have to be present in order to form joint tenancy in Minnesota. But you still need to know them for your national exam! Remember: Right of survivorship is a key feature of joint tenancy.

Servient vs. Dominant Estate

You may commonly hear the terms servient estate and dominant estate in easement appurtenant situations. Imagine that the McKinley and Rudolph properties are situated as depicted below. McKinley has a dominant tenement because he has the right to cross Rudolph's property to access the road. Rudolph has the servient tenement because he gives the right to cross to McKinley. The recipient of the right is the dominant; the giver of the right is servient.

Agency Definitions to Know

"Agency" refers to the type of relationship between a buyer or seller and a real estate licensee. Buyers, tenants, sellers, and landlords can enlist the assistance of a real estate professional to represent their interests and direct transactions on their behalf. As a knowledgeable expert, you can guide clients through the process and help them resolve problems and challenges along the way. Because the concept of agency is so integral to the practice of real estate and to the services clients expect, a full disclosure of whom you represent is vital to providing optimum service, maintaining your professional standing, and staying out of regulatory trouble. Throughout this section, we refer to the idea of an agency agreement. This agreement could be oral, implied (based on behavior), or in writing by contract. There is also an official agency disclosure form. You may have seen these forms in the past if you've ever bought or sold real estate before. We will cover these forms in depth later in the course. For now, we'll focus on the big-picture terms and behaviors associated with agency. In this section, we'll introduce some definitions important to the concept of agency and distinguish between "clients" and "customers." We'll also discuss some basic agency relationships, how your role may change during a transaction, and what to do about it. Throughout our discussion of agency, keep in mind that when we use the terms "buyers" and "sellers," the same principles of agency apply to your role in serving "tenants" and "landlords."

Five Tests to Determine Property Type

"You can't take it with you when you go" is how the saying goes. And that's true if you're selling real estate and "it" is a fixture. If you find yourself representing clients who are in love with their shrubbery or that antique light fixture they got from grandma, you'll need to know how to advise them. Is it real property or personal property, and can they legally take it with them? Example: When Mrs. Goldman sold her home, she took several rosebushes, the antique light fixtures, two throw rugs, and the custom draperies. Was she within her rights? It depends. If Mrs. Goldman removed these items before she listed the property, she's entitled to take them. If she stated in the contract that she intended to take these items, she's also entitled to do so. However, if the items were on the property when she signed a contract, and she didn't negotiate with the buyers to remove them, then she likely should have left them. How Do You Solve a Problem? With MARIA! The courts use five basic tests to determine whether an item is a fixture (it's part of the real property being conveyed in a real estate transaction and should remain) or personal property (it belongs to the seller and can be removed). Use the acronym MARIA to help you remember these tests, which are: - Method of annexation - Adaptability of item to land's use - Relationship of the parties - Intention in placing item on land - Agreement of the parties

Finder or Middleman

- Introduces the parties; does not form an agency relationship with either party - Collects a finder's fee - Doesn't owe fiduciary duties to either party (again, is not an agent) - Doesn't require a real estate license

Non-Agent

A non-agent—also known as a facilitator or transaction broker—is a licensee who has a unique relationship with a consumer, generally acting as a "middle man" in a transaction. While some states allow non-agency, the exact nature of the relationship and the duties owed to the consumer vary widely from state to state. A non-agent doesn't represent the buyer or seller, isn't a fiduciary, and can provide only limited services to facilitate the transaction. The non-agent assists either or both parties with clerical or ministerial tasks.

Statute

A salesperson shall only conduct business under the licensed name of and on behalf of the broker to whom the salesperson is licensed. An individual broker shall only conduct business under the brokerage's licensed name. A broker licensed to a business entity shall only conduct business under the licensed business entity name. A licensee shall affirmatively disclose, before the negotiation or consummation of any transaction, the licensed name of the brokerage under whom the licensee is authorized to conduct business according to this section.

Ratification

A seller agreed to leave a painting the buyer liked. As moving day approached, however, the seller was having trouble parting with her uncle's painting, so she took it with her. Then she contacted her agent to see if she could provide the monetary value of the painting instead of leaving the painting. An addendum to the contract was created, which the buyer signed.

Antitrust Violations - Tie-in Arrangements

A tie-in arrangement occurs when the providing of one service is made dependent on the customer or client obtaining another. For instance, an agent cannot tell a seller, "I can only offer this commission rate if you use the title company/inspector/mortgage broker I recommend." A tie-in arrangement may also be negative: "I can only work with you if you agree not to use XYZ Title Company." Both types of tie-in arrangements are violations of antitrust law.

The Two Duties that Survive Agency Termination

Accounting: I must keep you informed as to the status of your transaction, and I'm responsible for any funds, paperwork, or property I'm entrusted with on your behalf. This duty can also survive the end of our relationship. If anything remains outstanding, such as paperwork or property, I must account for it to you. Confidentiality: If you tell me something, I must keep it confidential (unless it's a material fact). I can only divulge your confidential information if you give me written permission to do so or under subpoena. So let's say you want to list your house for $300,000, but tell me in confidence that you'd sell for less. Another agent asks me, "I know you're at $300,000, but what will your seller take?" My answer will be: "We think $300,000 is a fair price." This duty of confidentiality survives the end of our working relationship. It lasts forever.

Agent of Broker Disclosure

All licensees must disclose and practice under the name of the brokerage under which they operate. Salespersons can only conduct business on behalf of their registered brokerage.

Agent and Fiduciary

An agent is someone who acts on someone else's behalf, at that person's request. Agency relationships require agreement from both parties. In other words, a consumer can't compel you to be his or her agent without your consent, and vice versa. You both have to agree. Once you do, the consumer becomes your client, and you become the client's agent and fiduciary—a person who's in a position of trust and owes loyalty to another. Quiz example for client: Someone who has agency representation with the real estate licensee. Quiz example for fiduciary: Someone who's in a position of trust and loyalty.

Estates in Land (Picture)

An estate means ownership or interest in a property. Ownership is a freehold estate. Real estate can be owned in many ways: estate in severalty, co-ownership, joint tenancy, tenancy in common ... We'll discuss the most common forms of ownership in this unit, as well. Possession is one of the rights in the bundle of rights of ownership, but it's not ownership. A person can possess a property and yet not own it—tenants do it all the time. The right of possession without ownership is called a leasehold estate. This is also known as a leased fee.

Settlement Service Providers

And regarding the Real Estate Settlement Procedures Act (RESPA), you may not receive or give referral fees or finder fees from/to mortgage brokers, title reps, or any other settlement service provider. This would be a violation of RESPA and is a big no-no. Do not cross Go. Do not collect $200 (or even $2).

Principal

Another term you'll hear a lot is principal. In real estate, this term has two meanings. The common definition is that a principal is a client—someone who's represented by a real estate professional. The term principal may also refer to a party to a transaction (e.g., the buyer or seller, whether or not they're represented by an agent). Example: Jean is selling her house to Marcus. You represent Jean, and Marvin is working with Marcus, though there's no agency agreement between them. Jean and Marcus are principals (parties) to the transaction. Based on your agency relationship, you'll act on Jean—your client's—behalf. Jean is the principal, and you're the agent and fiduciary in your agency relationship. Marcus isn't a principal in his relationship with Marvin, because there's no agency agreement between them. Another quiz example for principal: Someone who's a party to a transaction OR the person for whom the agent acts.

Unauthorized Practice of Law

Article 13 of the National Association of REALTORS® Code of Ethics prohibits the unauthorized practice of law. State licensing laws also prohibit licensees from performing tasks best left to licensed attorneys. How can you best avoid even unintentional unauthorized practice of law? - Know what your state defines as unauthorized practice of law. - Don't draft your own agreements or forms. - Whenever possible, use approved agreement forms from your local or state association. - If your client or transaction requires a form not provided by your association or firm, encourage the client to engage an attorney to draft the form. - Make changes to forms (adding or striking provisions) only to the degree allowed by law in your state. - Use standard, approved language in contingencies, addenda, and additional provisions areas. - Don't charge a fee for preparing transaction documents. - Don't interpret contract provisions. You can generally explain the purpose of a provision, but don't provide advice to the client regarding the legal implications of those provisions. Acceptable Explanation "This clause in the contract describes what happens if either party breaches the contract." Crossing the Line "This clause in the contract says that if the seller breaches the contract, you're guaranteed a full refund of your earnest money." Always encourage clients to seek legal advice before signing any legal document. Don't advise clients on landlord/tenant rights and responsibilities.

Fiduciary Duties

As a fiduciary and agent, you owe your client specific duties. These duties are most easily remembered by the mnemonic device OLD CAR. Each letter of OLD CAR corresponds to one of the fiduciary duties you owe to your clients. O stands for Obedience. You must obey all of your client's lawful instructions. L stands for Loyalty. You must put your client's interests ahead of all others. D stands for Disclosure. You must disclose all facts pertinent to the transaction. C stands for Confidentiality. You must keep any confidential information your client shares with you confidential. Confidentiality is a duty that survives the termination of the agency relationship—it lasts forever. A stands for Accounting. You must promptly account for all monies and property your client entrusts to you. Accounting, too, survives the agency relationship if any items are outstanding. For instance, if you owe your client paperwork, you must provide it, even when the agency relationship terminates. R stands for Reasonable skill and care. You must provide your clients with quality, knowledgeable, and prudent service, and live up to the trust they place in you.

Special Agent vs. Limited Agent

As a real estate agent, you may serve as either a general agent , with responsibility for all of the dealings of a specific piece of your client's property, or you may serve as a special agent , where you have limited authority to act on your client's behalf. Quiz example: Remember that another name for a special agent is a limited agent because the special agent has a specific function that's performed for a limited time. These are also the two most common agent roles a licensee may assume.

Defined: Land, Real Estate, Real Property, and Personal Property

As a real estate licensee, you'll need to know how the definitions of land, real estate, real property, and personal property differ: The earth's surface extending downward to the center of the earth and upward to infinity, including permanently attached natural objects: land. Land, plus all things permanently attached to it, naturally or artificially: real estate. Real estate, plus the interests, benefits, and rights automatically included with real estate ownership: real property. Everything that's not real property: personal property. Permanent, man-made attachments that include such things as fencing, buildings, and walkways: improvements.

Material Facts

As you're aware, licensees must disclose to potential buyers anything they know about the property that may affect their enjoyment or use of the property. However, there are some exceptions to this rule, when it comes to stigmatized properties—properties that buyers may shy away from for reasons other than physical defects. Licensees don't have to disclose if a home: Was occupied by a person with HIV/AIDS Was the site of a death or suspected paranormal activity Is near a group home, nursing facility, or "community-based residential facility" Also, as long as the licensee has provided the prospective buyer with the required written disclosures regarding the sex offender registry and airport zoning regulations, the licensee doesn't have to offer any additional information regarding those issues. When it comes to a home's physical condition, licensees don't have to disclose information that's already written in a third party's professional report (i.e. a home inspection report). However, if the licensee has information that contradicts the report's findings, the licensee needs to disclose that.

Antitrust Violations - Price Fixing

At its most basic level, price fixing is a conspiracy between business competitors to set their prices to buy or sell goods or services at a certain price point. The U.S. Department of Justice (DOJ) identifies other types of price fixing, including: 1) Agreements to establish or adhere to uniform price discounts 2) Agreements to eliminate discounts to all customers or certain types of customers 3) Agreements to adopt a specific formula for computing selling prices 4) Agreements on terms and conditions of sale, including uniform freight charges, quantity discounts, or other differentials that affect the actual price of the product 5) Agreements not to advertise prices or to refuse to sell the product through any bidding process Of course, just because several brokerages have the same commission rates, for example, doesn't mean a price fixing violation is occurring. According to the DOJ: The fact that all competitors charge the same price, or use the same terms of sale, is not, by itself, evidence of a price-fixing conspiracy because similar prices may in fact be the outcome of competition. However, where price increases are announced by all competitors at the same time, or prior to a uniform effective date, there is a substantial likelihood of collusion. Further, the fact that all prices are not identical does not indicate the absence of a conspiracy. For example, one company may have traditionally sold at a price lower than the others and, when a general increase in price occurs, the company with the lower price may adopt the same percentage or absolute increase as the others.

Personal Property vs. Real Property

Because it can be confusing, it's best to negotiate (and get in writing) the disposition of any questionable items. For commercial properties, for example, sometimes affixed items are considered trade fixtures and are therefore the renter's personal property. Another example would be display shelves installed by a business owner in a rented building. This is a little different from the attached shelving in the garage that we saw earlier in this lesson.

When must a Minnesota licensee disclose to the owner of real property that the licensee is a real estate agent salesperson, and in what capacity the licensee is acting, if the licensee, acquires, or intends to acquire, any interest in the owner's property?

Before the negotiation or consummation of any transaction.

Seller Agent Tasks

Beyond your duties as a seller's agent, you also perform other specific tasks on behalf of your client. Which of the following tasks must you perform for the seller? - Conduct an appraisal on the property: don't perform - Inform the seller of the responsibility to make all required property condition disclosures: perform - Negotiate contract terms in accordance with the seller's wishes: perform - Communicate all offers and counter-offers to the seller: perform

Kendall's client, Lawrence, is looking for a house on the beach. Lawrence tells Kendall he'll pay him a $2,500 finder's fee if he finds him exactly what he's looking for before the property hits the market. Kendall meets Margot at a neighborhood BBQ and learns that she's thinking of putting her house on the market. He realizes it ideally suits Lawrence's needs. "I can save you a lot of hassle," he tells Margot. "You won't even have to list it. I have a buyer at the ready." What circumstances are required for Kendall to receive the finder's fee? Drag each item to the correct location to indicate whether the circumstance is required in order for Kendall to receive the finder's fee.

Both parties would have to agree to dual representation - not required This isn't necessarily dual representation, for which disclosure would be required. However, Kendall must disclose the bonus and must define his relationship with Lawrence to Margot in writing. Kendall should also recommend to Margot that she get independent corroboration of his suggested sales price, because Margot isn't being represented. Lawrence must pay the finder's fee to Kendall's broker - required Margot must be represented by another licensee - not required Margot must list her house on the open market, and then if no other buyers are willing to pay more, she can sell to Lawrence at the price Kendall suggests - not required

Fiduciary Duties to Clients

Broker won't disclose client confidences: confidentiality Broker conveys material facts to client: disclosure Broker acts only in client's best interest: loyalty Broker carries out client's lawful instructions: obedience Broker acts with professionalism: reasonable care Broker properly handles any funds: accounting

Procuring Cause and Protection Clauses

Brokerage firms (and you) usually get paid based on a percentage of a property's sales price. The terms "procuring cause" and "protection clause" impact your compensation. Which two of these statements about these terms are correct?

When and How Brokers Are Paid

Brokers are generally paid at closing from sale proceeds based on the listing agreement terms. This payment concludes the broker/client agency agreement. Procuring cause refers to who started the chain of events leading to the sale, which often means whose actions produced a ready, willing and able buyer. If, for instance, Lisa, a salesperson, shows a property to Tim, and the next week Tim buys it from Marcia (the listing agent), Lisa may still be owed compensation because she started the chain of events that led to Tim's purchase. Different representation agreements protect a licensee's compensation to varying degrees, sometimes making the payment of compensation a matter of contractual obligation, rather than leaving it up to a question of who brought the buyer to the table. Procuring cause is a complex topic, and representation agreements should detail how the client will compensate the broker. Some agreements include a protection clause (aka holdover clause) that requires the client to abide by the compensation agreement if the client buys or sells within a certain amount of time after the agreement terminates. Example if you showed Tina a property, and after the agency agreement expired, Tina purchased it through another licensee, Tina may owe you the agreed-upon compensation. It's possible that you could be owed a commission even if the sale doesn't go through. For instance, the listing agreement may protect your commission if the seller arbitrarily decides not to sell in spite of your best efforts and marketing expense, and the fact that you produced a ready, willing, and able buyer (one who wants to and is capable of buying the property at the agreed-upon price).

Salesperson Compensation

Brokers may share their compensation with their salespeople. The license you place under your broker gives your broker the right to share compensation with you. This means if you procure a listing and it sells, the listing—which always belongs to the broker—will provide compensation for both of you: first to the broker, and from that fee, your split according to the terms of your agreement. You may receive: - A fixed salary - A percentage of the amount received by the broker - 100% of the commission, from which you pay a "desk fee" or "office fee" to your broker No matter how you are compensated, your compensation must go through your broker first. This is a licensing requirement. You may not be paid directly for your brokerage services.

What Is the Difference Between Ethics and Law?

Can you go to jail for an ethical violation? Not unless it also violates a law. While laws are often based on what society deems ethical, you can't legally enforce ethics. In order to enforce an ethical breach (for instance, stealing someone's car), a law has to be created to make such an action illegal, even though most members of society would agree that it's unethical. The government makes laws to safeguard the welfare of its citizens. If you break a law, you can be punished. Ethics, on the other hand, are dependent on a person's conscience and values, and, with certain exceptions, there is no external punishment for an ethical breach. Both ethics and laws are rules of conduct, but ethics are created from a person's moral values. Because morality differs from person to person, laws are made with generally accepted ethics as their guiding principles. Laws codify generally accepted ethical behavior, making a clear distinction for those within their jurisdiction.

CIIA - Client's Duties Owed to the Agent at a Glance

Compensation The client is required to pay a commission or fee to the broker upon completion of the agent or broker's duties as specified in the agency agreement (either listing agreement or buyer agency agreement). Information The client is required to provide complete, accurate, and timely information to the agent or broker. The agent or broker relies on this information to assist the client in completing a successful transaction. Indemnification The client agrees to release (indemnify) the agent or broker from all financial liability should the client, agent, or third party suffer personal injury while on the property or the property itself sustain damage during the term of their agency relationship, unless the injury or damage was due to the agent's or broker's negligence. Availability The client agrees to be available to answer questions pertaining to the real estate transaction and respond to offers, counter-offers, and other activities that require the client's input.

Marie is the listing agent for Amy's house. In a meeting with prospective buyer client Jim, Marie realizes that Amy's house might be perfect for him. She discloses this information to Jim and Amy, explains the concept of dual agency, and asks if they're willing to work this way. They say yes. What must they acknowledge in the consent form? Select all that apply.

Confidential information will stay that way unless they give Marie written permission to disclose. Marie will not advocate for either one of them to the detriment of the other. There may be conflicting interests but Marie will work diligently to ensure the sale goes through.

Broker-Salesperson Compensation

Consumers generally compensate brokers for their services in the form of a percentage of the property's sales price. However, some brokers work on a fee basis (such as a flat fee or fee-for-services arrangement), or even an hourly basis. Broker compensation is always negotiable, but brokerage firms can set compensation policies; consumers are free to shop around. It's important to remember that there's no "standard" fee. To even suggest that a standard fee exists would be an antitrust violation called price fixing. The following are examples of how these compensation structures work: Flat fee: The broker receives $1,000 for each property sold. Fee for service: The consumer selects from a menu of services and pays a fee for each. Percentage of sales: The broker is paid a percentage of the sales price from the seller's proceeds at closing (or alternatively from the buyer at closing if working under a buyer agency agreement and receiving no cooperating fee from the seller).

As a seller's agent negotiating a buyer's offer, you'll have a relationship with both the seller and the buyer, but in what capacity? Identify your relationship with both the buyer and seller.

Customer: buyer Client: seller When you serve as a listing agent, you're providing seller agency. You may not think about it like that, but it's important that you do make that distinction.

Estoppel

Does the scenario resemble a ratification or estoppel situation? The sellers left some storage shelving in the basement after they moved out. They purchased new ones, but then asked the buyers to let them in to retrieve the shelving they left. The buyers refused. The sellers threatened to sue, but their lawyer advised them they couldn't.

Dower and Curtesy

Dower is a form of legal life estate and refers to a wife's interest in the real estate owned by her deceased husband. Dower isn't recognized in all states. Curtesy is a form of legal life estate and refers to a husband's interest in the real estate owned by his deceased wife. Curtesy isn't recognized in all states.

What is the first of the two primary categories of real estate characteristics?

Economic

Fiduciary Duties

Fiduciary duties are the special obligations a licensee has to a principal (client). They can be remembered using the acronym "OLD CAR": Obedience: Carry out the client's lawful instructions Loyalty: Put the client's interests above all others, including the licensee's Disclosure: Provide all information to parties as required by law Confidentiality: Keep the client's information confidential, with the exception of any information lawfully required to be disclosed Accounting: Responsibly handle any funds entrusted to the licensee Reasonable skill and care: Act at the utmost professional level in serving the client

Agency Types

For the most part, as a real estate licensee, you'll be a general agent (as in the case of a property manager), a special agent (when you represent a client in a real estate transaction), a limited agent (where you offer limited services), or a non-agent, where you don't provide representation, but merely transactional assistance.

Antitrust Violations - Group Boycotting

Group boycotting involves two or more businesses conspiring against another. In the real estate profession, this can occur, for instance, when two or more brokers or agents refuse to cooperate and split commissions with another one, or when several brokerages in a certain area agree to stop running advertisements in a local newspaper. Some additional types of group boycotting include: - Boycotting a competitor - Boycotting a supplier or vendor - Discussing or agreeing to the different treatment of a competitor as a group Often, group boycotting involves brokers agreeing to not show the listings of limited services firms, hoping to drive them and their competitive pricing out of the market. In whatever form it takes, group boycotting is a violation of antitrust law.

General or Special Agent?

Handles all dealings for a specific piece of client property: General agent Conducts duties of property managers: General agent Enters into contracts on the client's behalf: General agent Acts as an intermediary, but doesn't make decisions or enter into contracts on the client's behalf: Special agent Acts with limited authority on a client's behalf: Special agent Covers most real estate transactions involving a buyer and seller: Special agent

No Undisclosed Compensation

Here's another guideline that will help: You may not receive undisclosed compensation from any party related to the transaction. That means everyone has to know who's paying you and why. So if you were representing the seller, the buyer offered to pay you $500 to "make sure my offer makes it to the top of the pile," and you accepted it, even if it were somehow funneled through your broker (which it wouldn't be, because your broker would know better), this would be a violation of real estate law. If a seller offered a bonus to any buyer's agent to close by a certain date, you need to disclose that bonus to any buyer you work with on that transaction. The reason is simple: The incentive creates an inherent conflict of interest.

What Can A Finder Do?

If Licensed - Provide brokerage services, including negotiating, advocating, advising - Must follow agency disclosure law; must be careful not to create undisclosed agency If Unlicensed - May not provide brokerage services - May only match-make (buyers with sellers, landlords with tenants)

homestead exemption

Imagine if the first $390,000 of your home's value was exempt from property taxes and protected from creditors. Guess what? It's possible—at least, if you live in Minnesota. Minnesota homestead law allows property owners to take advantage of certain benefits and protections for their principal residence by applying for a homestead exemption.

Buyer Agency

In a buyer agency relationship, you exclusively represent the buyer. In the past, buyer agency was not properly practiced in residential real estate. The licensee's commission was drawn from the sale of a property, so it was assumed that buyers didn't need to be represented in the transaction and were regarded only as customers. Of course, much has changed over the years, and it's long since been mandated that buyers can and should be protected through an agency agreement, as well. When you represent buyers, it's your responsibility to advocate for your clients' interests and seek the best price available or a price that's acceptable to them. As a fiduciary, you're obligated to complete certain tasks for your buyers over the course of a transaction, such as: - Show them properties that meet their criteria and fall within their budget. - Ensure that they receive all required property condition disclosures from the seller. - Ensure that they understand the importance of due diligence, including a professional inspection of the property. - Review transaction documents with them, clarifying anything that could be confusing, without stepping outside the scope of your license (in other words, refer buyers to an attorney for interpreting any legal consequences or language). - Negotiate contract terms that are fair and agreeable to them.

Seller Agency

In a seller agency relationship, you represent the seller. It's your duty to advocate solely for the seller and seek a sale of the property at the best price available or a price that's acceptable to the seller. The buyer, when you represent the seller in a single agency relationship, is your customer. Example Real estate licensee Elizabeth represents Artie, who's selling a home. Elizabeth has a single agency relationship with Artie. Holly, a potential buyer, makes an offer on Artie's home. In this situation, Artie is Elizabeth's client, whereas Holly is Elizabeth's customer. You must disclose to the buyer that you don't represent her. Obtain the buyer's acknowledgment of this fact in writing. This can best be done by use of the mandatory disclosure form. Note that when you're representing a seller, you may list other properties for sale, even if they're competing.

Class of Plants Recap

In short, plants that are in the ground and attached to the soil are considered real property whereas plants that are not affixed to the soil, such as potted plants, are considered personal property. An exception to this are cultivated crops, called emblements, which are considered personal property even though they are part of the soil. Two actions that impact these plant classifications are severance and annexation. Severance occurs when an item that was real property becomes personal property by detaching it (severing it) from the land. Annexation occurs when personal property is attached to real property, which makes it a fixture. And why do you need to know about these classifications and how severance and annexation can change the classifications? The sales contract needs to spell out any plans by the seller to take what appears to be real property and turn it into personal property by detaching it, and these plans need to be agreed to in writing by the buyer.

Antitrust and Real Estate

In the real estate industry, the most common types of per se (pur-SAY) antitrust concerns are price fixing and group boycotts, but there are also market allocation agreements and tie-in arrangements. As we take a closer look at each of these, notice the key similarity: All involve an agreement, which may take the form of a written document, verbal exchange, or even be inferred from conduct (such as a meeting between competitors followed by joint conduct). Without an agreement, there is no violation.

Antitrust Violations

In the real estate industry, watch out for antitrust violations such as: - Price fixing - Group boycotts - Market allocation agreements - Tie-in arrangements These violations share a key similarity: They involve an agreement between competitors to restrain trade unreasonably. The agreement may take the form of a written document, verbal exchange, or even be inferred from conduct (such as a meeting between competitors followed by joint conduct). Without an agreement, there's no violation.

Yes, she is. This is a tricky one. The correct response deals with how the buyer's offer was handled. Remember, Keira has a duty to present all offers.

Is Keira Breaching Her Duties? Keira's sellers have decided to list their home at $300,000. They say they don't have much wiggle room on the price and ask to not even be bothered with an offer less than $290,000. After a few weeks on the market, an offer comes in at $280,000. Keira thinks for a minute about what to do, then calls the buyer's agent back to tell him that his clients need to bring the offer up; the listing price is $300,000. Did Keira break any fiduciary duties? Correct answer: Yes. She must present every offer to the client, regardless of their instructions, and she did not. You got it! All offers, whether too low or too late, must be submitted. In this situation, Keira should explain to the clients ahead of time that she has an obligation to present any and all offers. As her sponsoring broker, you need to ensure Keira is fulfilling her fiduciary duties and staying within real estate law.

Client's Duties Owed to the Agent at a Glance

Just as an agent owes certain duties to the client, the client (or principal) owes a number of duties to the agent or broker. Any easy way to remember these four duties is with the acronym CIIA. Think of CIA, but with an extra "I" added to the mix. Similar to the client, the CIA compensates its agents and provides them with the information they need to do their jobs. The CIA also indemnifies its employees should they suffer injury while on duty, and the CIA management makes itself available to its agents to answer any questions/concerns the agents might have.

Commission Protection Clauses

Let's face it: A lot of money changes hands during a real estate transaction, and some people are willing to engage in some underhanded, miserly practices in order to save some dough. As passionate as you may be about real estate, you're doing it in part to pay the bills. Luckily, protections are in place to make sure your money ends up right where it should—in your pocket. Agency agreements often include a commission protection clause (sometimes known as an extender, safety, or override clause), which states that the broker is owed a commission if a contract is signed within a certain number of days after agency expiration and the brokerage was the procuring cause. The protection window varies greatly, anywhere from three days to a year. Example You list the Smiths' home and include a safety clause of 30 days. Five days after your listing contract expires, they approach a buyer who viewed the property when it was listed with you and sign a contract. Because the contract was signed within the 30-day protection window and your broker was the procuring cause of the contract (the buyer viewed it while it was listed), the Smiths owe your brokerage a commission.

Agent Types Part 2

Let's put these agency categories into perspective. Alison is representing Brent in his search to purchase a new home. Brent only needs Alison's services for this one purchase, but he wants her to be involved in every step of the transaction. This makes Alison a special agent. In fact, she typically represents buyers and sellers, spending most of her career as a special agent. Carter is also a licensed salesperson, but with a very different day-to-day role. He is a property manager and handles all of the dealings for multiple apartment complexes. As is typical with Carter's clients, Bill, a building owner, doesn't want to be involved in every lease contract and gives Carter a lot of power to just run things without his involvement. Carter can enter into leases with tenants on Bill's behalf, collect rent, evict tenants, and perform other duties listed in the property management agreement Carter and Bill have signed. This makes Carter a general agent.

Nonperformance of a Party

Licensees are responsible for immediately notifying all parties if they discover that one or more parties isn't able to uphold their end of the contract. So if a lender calls you and says, "Sorry, buddy, your buyer's financing didn't go through," you need to get on the phone to the seller's agent, title company, etc., right away to keep everyone in the loop. Statute If a licensee is put on notice by a party to a real estate transaction that the party will not perform according to the terms of a purchase agreement or other similar written agreement to convey real estate, the licensee shall immediately disclose the fact of that party's intent not to perform to the other party or parties to the transaction. The licensee shall, if reasonably possible, inform the party who will not perform of the licensee's obligation to disclose this fact to the other party or parties to the transaction before making the disclosure. The obligation required by this section does not apply to notice of a party's inability to keep or fulfill any contingency to which the real estate transaction has been made subject.

Dual Agency

Licensees must fully disclose when a dual agency situation arises to the transaction parties. Written consent from all parties is required. The statute provides the consent text (that must be formatted in a box to draw attention to it) that should be provided in the residential purchase agreement. Here is the language from the statute, which would be followed by signature lines for both parties. "Broker represents both the seller(s) and the buyer(s) of the property involved in this transaction, which creates a dual agency. This means that broker and its salespersons owe fiduciary duties to both seller(s) and buyer(s). Because the parties may have conflicting interests, broker and its salespersons are prohibited from advocating exclusively for either party. Broker cannot act as a dual agent in this transaction without the consent of both seller(s) and buyer(s). Seller(s) and buyer(s) acknowledge that: (1) confidential information communicated to broker which regards price, terms, or motivation to buy or sell will remain confidential unless seller(s) or buyer(s) instruct(s) broker in writing to disclose this information. Other information will be shared; (2) broker and its salespersons will not represent the interests of either party to the detriment of the other; and (3) within the limits of dual agency, broker and its salespersons will work diligently to facilitate the mechanics of the sale. With the knowledge and understanding of the explanation above, seller(s) and buyer(s) authorize(s) and instruct(s) broker and its salespersons to act as dual agents in this transaction."

Financial Interests Disclosure

Licensees need to disclose that they're a licensed real estate professional if they're purchasing or intending to acquire interest in a property. If a licensee is selling a property on a relative or business associate's behalf, the licensee must disclose it in writing. The same goes for properties in which the licensee has a financial interest. Statute Before the negotiation or consummation of any transaction, a licensee shall affirmatively disclose to the owner of real property that the licensee is a real estate broker or agent salesperson, and in what capacity the licensee is acting, if the licensee directly, or indirectly through a third party, purchases for himself or herself or acquires, or intends to acquire, any interest in, or any option to purchase, the owner's property. When a principal in the transaction is a licensee or a relative or business associate of the licensee, that fact must be disclosed in writing.

Freehold vs. Leasehold Estate Terminology

Maintain a general understanding of these as they may come up on our exam. Fee simple absolute: most complete form of ownership and bundle of rights in real property. (You will most commonly see this form of estate) Fee simple: an inheritable estate. Life estate: property possessed for someone's lifetime. Qualified fee/defeasible fee: Tom Jr. can keep the property his parents transferred for as long as he remains unmarried. Fee on condition: Tom Jr. can own the property his parents transferred—but if he develops the land, his ownership will end.

Antitrust Violations - Market Allocation

Market allocation occurs when real estate professionals from two or more competing firms agree to divide their market—by geography, price range, property type, etc.—and then refrain from competing for business. This used to be common practice within a brokerage—"You take the north side of town, I'll take the south"—so real estate agents weren't tripping over one another in their pursuit of business. But any agreement that restricts trade, discourages competition, or restricts choices for the consumer—which market allocation does—is a violation of antitrust law.

MN Agency Disclosure Form

Minnesota law requires a licensee to present a residential real estate consumer with an agency disclosure form at the time of their first "substantive" meeting with each other. The form must explain all the agency options available to the consumer, and the licensee's duties under each option. The form must include a signature line. Here's the language from statute 82.67 covering agency disclosure requirements. The statue also provides the language for the disclosure form. "A real estate broker or salesperson shall provide to a consumer in the sale and purchase of a residential real property transaction at the first substantive contact with the consumer an agency disclosure form ... The agency disclosure form shall be intended to provide a description of available options for agency and facilitator relationships, and a description of the role of a licensee under each option. The agency disclosure form shall provide a signature line for acknowledgment of receipt by the consumer. The disclosures required by this subdivision apply only to residential real property transactions."

Classes of Plants

Mrs. Goldman removed rose bushes when she was preparing to sell her house. This would've been fine if the parties had agreed in writing to their removal. But because they hadn't, and because the rose bushes were part of the real property (they were in the ground and therefore attached), they became real property and couldn't be removed without an agreement to do so. Is it ever okay to remove plants without permission? Of course. Potted plants are fine—they're not affixed to the property. And crops are considered the personal property of the person who planted them. Let's say your client's buying property that includes a Christmas tree farm. You'll want to make sure the contract between the parties correctly spells out the disposition of those trees. Cultivated crops are called emblements and are considered personal property, even though they're part of the soil. Severance occurs when an item that was real property becomes personal property by detaching it (severing it) from the land. For example, if prior to marketing her property for sale, Mrs. Goldman had dug up and potted her rose bushes, anticipating taking them with her (or giving them to her niece) when she moved. By taking them from the soil and potting them, Mrs. Goldman would've severed them and transformed them from real property to personal property. The opposite of severance is annexation. This occurs when personal property is attached to real property, which makes it a fixture. So when Mrs. Goldman first brought her rose bushes home from the nursery, they were personal property until she planted them, or annexed them, to the land, making them fixtures and part of the real property.

Real Property Rights

Now that you've correctly identified what real property rights are, let's see if you know what they mean: - Rights to occupy the property: possession. - Rights to determine interest in the property for others: control. - Right to possess the property without harassment or interference: enjoyment. - Right to refuse other interests in your property: exclusion. - Right to determine how, when, and whether the property is to be sold, leased, mortgaged, or transferred: disposition.

Client (OLD CAR)

Obedience Loyalty (undivided) Disclosure of material facts Confidentiality Accounting Reasonable skill and care Honesty and fair dealing Prompt presentation of all written offers and counter-offers

Agency Duties that Survive Termination of a Brokerage Relationship

Obedience: Whatever you ask of me, I must do it—as long as it's within my scope as your agent and it doesn't break the law. I'll tell you if I feel your request is contrary to your best interests, but the decision is always yours. Loyalty: Undivided loyalty means I can't put my own or anyone else's interests ahead of yours when I represent you. Disclosure: I must tell you any material facts I know about the transaction, as well as any other pertinent information. For example, perhaps I know that your property would be worth more if it were divided, or that a buyer is famous for lowball offers, or that a similar house down the street is about to come on the market. I would be required to share this information with you. Reasonable skill and care: This speaks to my level of professionalism, training, experience, and work ethic. You can expect top-notch service from me. I will serve your interests throughout the transaction, and I won't look the other way if I see an opportunity or risk for you, based on my experience. I'll advise you to seek expert advice if something arises that is outside the scope of my expertise or licensure.

Property Ownership and the Bundle of Rights

Ownership of land involves much more than a deed to a parcel and any building upon it. An owner is granted many legal rights related to the property. The bundle of rights is the common term to explain the complexities of property ownership rights. These include: - The right of possession (the property is owned and may be possessed by the title holder) - The right of control (the owner controls the use of the property) - The right of exclusion (the right to decide who may or may not access the property) - The right of enjoyment (the ability of the owner to use the property in any legal manner) - The right of disposition (the right to sell or convey the property).

What's "Per Se," You Say?

Per se means that guilt is established on the face of the circumstances—no need to prove intent. If you do certain things, just ... BAM! You're guilty. It means that no defense, justification, or excuse will be permitted. Absent per se circumstances, the court looks at the entire situation to determine guilt or lack thereof. Per se guilt is determined when there is agreement between competing entities to do or not do an activity that has the effect of always or nearly always restricting competition.

Water Rights

Percolating The right to draw water from underground resources (such as wells) for the landowner's use. Riparian The right to access and use rivers, streams, and other flowing bodies of water adjacent to the property. Littoral The right to access and use ponds, lakes, oceans, and other stationary bodies of water bordering the property. Prior appropriation The doctrine that grants water rights based on which entity or individual was the first to put water from a given source to beneficial use, rather than based on the adjacency of the water to a specific property.

What is the second of the two primary categories of real estate characteristics?

Physical

Property Ownership - What does this Include?

Property ownership includes the right to use the land's physical components. These are known as surface, subsurface, and air rights. Surface rights include both land and water rights. Subsurface rights pertain to the right to use underground resources such as natural gas and minerals. These are often referred to as mineral rights. Air rights involve the right to use the open space above buildings up to a height established by law. (Who knew, right? "Hello, I'd like to buy some air.") In addition, there is the right of profit (the right to harvest timber, for instance, and sell it). Some of these rights may be separated from the land by the owner by transferring ownership or an interest to another. For example, mineral rights can be separated from the property, or an owner can mortgage the property, thereby transferring an interest to a mortgagee for the term of the loan (this is known as the mortgage right). Generally speaking, landowners like to retain as many rights as possible (the more rights that can be conveyed, the greater the property's value). By imagining a bundle of sticks (a visual reference to the bundle of rights), it's easy to see how one stick can be sold to another, and yet the rest of the bundle remains intact.

Protection Clauses

Protection clauses ensure that you won't do a bunch of legwork for a client and then get left out of the loop when it comes time to get paid. They allow you to collect a commission even after your agency relationship has expired, as long as you were involved in identifying the property or the buyer. That makes you the "procuring cause."

Leasehold Estate

Provides an interest in real estate for a limited time.

As a single agent, on what topics can you advise your clients?

Real estate: yes Mortgage qualifying: cannot Legal items related to the transaction: cannot Appraisal amount: cannot

Characteristics of Real Estate

Real property includes real estate (land and anything naturally or artificially attached to it), as well as the interests, benefits, and rights automatically included with real estate ownership. Real property has some specific economic and physical characteristics not found in personal property, which include:

If you're serving as a dual agent, what can't you disclose to your buyer client? Select all that apply.

Reasons for selling, Minimum amount sellers will take or Details about other offers. You're prohibited from sharing pricing, the terms of any offers, and motivations for selling. Other information may be shared as required or appropriate.

Leasehold Estate Terms

Sarah's ready to sign a lease on a new place. Turns out there are several types of leases out there. She could sign a lease for a period of 12 months, establishing a(n) estate for years. She could sign a lease for a period of 12 months, at the end of which the lease is renewed. This is a(n) periodic estate. Or she could establish a(n) estate at will by signing a lease for an unspecified period of time, with the stipulation that either she or the landlord may terminate the lease by giving notice to the other. At the end of all this, she could just refuse to leave the property when her lease terminates, creating a(n) estate at sufferance.

Serena, a Minnesota broker, represents a seller client. A buyer made an offer on the seller's property, which was accepted contingent upon a home inspection. After the inspection is performed, the buyer's agent provides a copy of the report, which doesn't include any mention of the roof leak Serena's client told her about. What obligation does Serena have?

Serena has a duty to disclose material facts she's aware of, including facts that contradict the inspection report.

Single Agency

Single agency firms require that the brokerage, and all the brokers and agents within that firm, act in a fiduciary capacity for either the buyer or the seller in a real estate transaction, but not for both. Single agency firms prohibit their licensees from representing opposing sides in a transaction. It's important that you know and adhere to your firm's policies. When acting as a single agent, you owe your undivided loyalty to that client. You still owe duties of fairness, honesty, and proper accounting of funds to other parties, but that's where your obligation to them ends. You advocate in the best interests of your client, period. As a single agent, you're an advisor for your client in real estate matters. However, if your client asks for advice that's outside the scope of your expertise, your duty as a fiduciary dictates that you refer the client to an expert. It's sometimes tempting to try to be all things to a client, but acting outside your license is a mistake that can have serious repercussions. When faced with a situation that you're unsure of, refer.

Who's the Third Party in a Transaction?

So who IS the third party in a transaction? Any person who is involved in a transaction in which you're involved—and who is not your client—is a third party to you. Customers, lenders, appraisers, and other service providers are all third parties. For instance, if you are the seller's agent, the buyer and the buyer's agent are your customers, and third parties. If you are the buyer's agent, the seller and the seller's agent are your customers, and third parties. Unrepresented buyers are customers, and third parties, too. Lenders, appraisers, and other service providers are not customers, but they are also third parties.

Antitrust

The Sherman Act (1890) Prohibits monopolies and collusive actions that result in unreasonable restraint of trade, such as price fixing. The Clayton Act (1914) Supports the Sherman Act by prohibiting mergers or acquisitions that would unreasonably reduce competition or create monopolies. The Federal Trade Commission Act (1914) Created the Federal Trade Commission (FTC), an agency with the purpose of preventing unfair methods of competition in commerce.

Prior Appropriation

The doctrine was developed historically in western states, where water was more likely to be a scarce commodity. Current states that subscribe to the doctrine include, but aren't limited to, Alaska, Arizona, California, Colorado, Hawaii, Idaho, New Mexico, Oregon, Utah, and Washington. Details differ between states, but essentially water rights are unconnected to property ownership, and can be sold. In some states, once water rights are granted they are attached to the land of the permit holder. Beneficial Use To secure water rights in prior appropriation states, the requested use must be considered beneficial to some household, agricultural, or household operation. Irrigation, for instance, is a beneficial agricultural use. Hydroelectric power is a beneficial residential, commercial, and industrial use. Single Source, Multiple Rights The rights to a water source are sometimes granted to more than one user. If the first permit holder doesn't need all of the water for its declared use, additional permits may be granted. In times of shortage or drought, the permit holders may be required to reduce their usage, with the first permit holder ensured of access to at least some water.

Rachel is talking with a co-worker, Shawna, about homebuying. Rachel shares some general market trends and talks about the impact of rising interest rates. She notes that the listing price of Shawna's neighbor's house seems lower than it should be, and then they talk about the importance of getting pre-approved for a loan early in the process. Which of her statements might have created an implied agency situation?

The listing price of the neighbor's property.

Termination of Agency

There are several ways in which an agency relationship may be terminated: 1) The client's goals were met during the agency agreement term (i.e., the sale is completed). 2) The specified term in the agency agreement expires. 3) The client and agent mutually agree to dissolve the relationship. 4) The relationship ends through termination by force of law (aka by operation of law): a) The client or the firm's broker becomes incapacitated or dies. b) The property is destroyed for any reason, making the property unmarketable. c) The client or the firm's broker files for bankruptcy. 5) The client revokes the agreement prior to the agreement's expiration date. Clients can revoke an agency relationship with no penalty if they lack confidence in the agency or believe the agency to be untrustworthy. If a client revokes the agreement for no specific reason or without good cause, the client may be in breach of contract. 6) The agent renounces the agreement prior to the agreement's expiration date. Prior commitments may still need to be fulfilled when an agency agreement is terminated prior to the agreement's expiration date, especially if the client is in breach of contract. For instance: - The client, agent, or both parties may be responsible for damages or liabilities incurred during the agency relationship. - The client may need to pay a commission to the agent, even if the client revokes the agency relationship. For instance, if a seller terminates an agency agreement by withdrawing the property from the market prior to the expiration of the listing agreement, the agent may still be able to receive compensation if the agency agreement specified a time to complete the transaction. For open listing agreements that do not include a time limit, an agent may not be able to seek compensation. - The agent may need to follow through on agency-related actions for the client until the agency relationship terminates. In addition, some duties survive the termination of an agency agreement. For instance: Accounting for all money and other property received during the relationship: This duty ends once all money and property have been accounted for. Not disclosing confidential information: The duty of confidentiality never ends.

Are these clients?

We'd like to introduce Alison, a real estate licensee. Alison just received a call from the Masons. They're interested in putting their house on the market and would like to talk more with Alison about this process. Alison meets with the Masons the next day and is excited about this new prospect. She leaves them with her business card and a promise to call back in two months when they say they'll be ready to act. In return, Alison leaves with an unsigned agency agreement and contact information for their son, Brent, who's ready to buy his first home. Are these clients? NO. There's no agency agreement in place; therefore, the Masons aren't Alison's clients.

Client vs. Customer

What makes Jean your client and not your customer? It's the agency relationship between you. Without that agreement to act as Jean's agent, you wouldn't be her agent, and she wouldn't be your client. She'd be a customer, and while she'd still be a principal to the transaction, she wouldn't be a principal in an agency relationship. Quiz Example: Someone who's working with a real estate licensee, but who isn't represented by him. As someone involved in the transaction, but whom you don't represent, Jean would be a customer. But, if she weren't involved in the transaction at all, and was just someone who stopped by an open house without making significant contact with you, there is a term for that, too: Jean would be a consumer. Consumers are those who might use a product or service (like an open house) without actually being involved in the transaction in any way. Quiz Example: Someone who uses or purchases a product or service.

Final Word: Unauthorized Practice of Law

When you begin your new career, remember to practice within your expertise. Don't offer opinions on areas outside of your expertise, especially pertaining to the practice of law. As much as we all want to have all the answers, we don't. We aren't Jacks (or Jills) of all trades, nor should we claim to be. Always recommend consulting an expert when questions arise that are beyond the scope of your expertise. This is vital to keeping your license and your reputation intact.

Let's say you own a two-story commercial building in the heart of the city. A large balloon payment is coming due, you have no money, and you're about to lose your building. Across the street from you is a brand new luxury condominium complex in an early phase of completion. You know that once that building is complete, property values will increase. But you can't hold out for long. You may have to sell out to another developer to pay off that loan. It's just not fair. If only you could find a way to raise some cash. Can you think of anything? Click on the opportunity right before your eyes! Hint: You can always go back a couple of slides and watch the video if you need some ideas.

Yes! You could consider selling your air rights. These rights may be especially appealing to a developer who could build more floors of commercial space (if zoning ordinances and other laws permit). These rights may also be appealing to the luxury condominium builder (so you don't block his view) or residents, who may be interested in preserving any views from the complex.

Chris, a real estate broker, represents Beverly, a seller. Beverly tells Chris, "If you can get my house sold within 30 days, I'll pay you and the buyer's agent a $1,000 bonus." Is this legal? Hint: there may be more than one correct answer in this scenario.

Yes, but it must be disclosed to all parties. Yes, but the fee must go through the brokers.

Seller's Agent Duties

You must perform specific tasks for your seller clients (unless the seller's attorney has or will perform these tasks). These tasks include: - Invest your time and energy in marketing and selling the property. - Inform the seller of the responsibility to make all required property condition disclosures. - Negotiate contract terms in accordance with the seller's wishes. - Ensure that the buyer's earnest money is deposited by the contracted deadline. - Communicate all offers and counter-offers to the seller. When you represent a seller, you should have an express agency agreement in place. The listing agreement accomplishes this requirement and spells out the scope of your authority and agreement for compensation. Working under an implied agency agreement is definitely not recommended. Get it in writing! At the time of a listing, inform the seller that some agents who show the property will be acting as buyer's agents. If the seller is concerned about having unknown agents on the property, you can offer to be present for all showings. As a practical matter, this can be a scheduling issue, but it's important that you protect your seller's interests. Also at the time of the listing agreement, you and the seller should agree as to offers of cooperation and offers of commission to other licensees outside your company. Remember that cooperation must always be offered to buyer brokers, even when compensation isn't.

MN Advertising Requirements

You've got a brand new real estate license and you're about to order some brand new business cards and print up some brand new fliers to drum up some brand new business. But how do you literally brand all of this brand new stuff? Minnesota law requires that any real estate advertising include the brokerage's name, and it must be clearly and conspicuously displayed. So if you're thinking of having your name in bolded, underlined, 72-point font and your broker's in italicized 12-point, you may want to rethink that. If you're part of a team or group, you can include the team or group's name in your advertising, as long as your broker authorizes it and you make sure the brokerage's name is clearly and conspicuously displayed. Bottom line: Let that brokerage's name shine. Here's the exact statute (82.69) text in case you'd like to see it: Any advertising by a licensee must clearly and conspicuously display the real estate brokerage name. If a salesperson or broker is part of a team or group within the brokerage, the licensee may include the team or group name in the advertising only under the following conditions: the inclusion of the team or group name is authorized by the primary broker of the brokerage to which the salesperson or broker is licensed; and the real estate brokerage name must be clearly and conspicuously displayed in the advertising.

Planning Commission Duties

"Zoning ordinances are established before the planning commission presents its recommendations to the local government for the comprehensive master plan." FALSE - This statement is false. Zoning ordinances are established after the planning commission presents its recommendations to the local government for the comprehensive master plan, not before.

Distinguishing Characteristics of PUD and MUD Living

** Good work! PUDs and MUDs are distinguishable from other types of housing by the fact that they have a mix of residential and commercial housing, and the ownership profile varies depending on type of housing.

Minnesota Uniform Condominium Act Requirements

- Create and record a declaration of condominium. - Provide a survey of the property. - Provide a legal description of the units and the common elements, including any elements that serve a single unit. - List the bylaws governing the operation of the condominium association and restrictive covenants that apply. - Provide blueprints showing the size, boundaries, and location of each unit. ** The Minnesota Uniform Condominium Act requires the owner of an existing building or the developer of new, unimproved land who wants to create a condominium project to adhere to all of these regulations.

Why was the Minnesota Uniform Condominium Act created? "Minnesota's Uniform Condominium Act established the guidelines for condominium formation, It outlines the documentation that needs to be filed, as well as the procedure for converting existing apartments into condos. The Minnesota Condominium Act established guidelines related to condo ownership."

1) To establish the process for condominium creation 2) To provide certain disclosures for purchasers of condominiums ** The Minnesota Uniform Condominium Act was created to establish the process for condominium creation and to provide certain disclosure for purchasers of condominiums.

Why was the Minnesota Common Interest Ownership Act created?

1) To give association boards the power to amend community rules without residents' approval AND 2) To keep association boards accountable. ** The Minnesota Common Interest Ownership Act was created to provide associations a way to amend bylaws without going through a lengthy process. The MCIOA also works to keep association boards accountable for their actions.

Tenancy in Common

A tenancy in common will also be created when two or more people who are not married to one another buy a property through a deed, and do not state an ownership type. The default, then, is tenancy in common. Any tenant may sell that tenant's share without asking permission of the other tenants in common. Tenants in common don't necessarily have equal interests in a property. Let's suppose, instead, that Jack, Jerry, and Joe purchased a property together. Jack put up half of the money; Joe and Jerry each put up one-quarter of the money. Their ownership, then, is 50%, 25%, and 25%.

Manufactured vs. Modular Homes

Although both manufactured and modular homes are built in a factory, they are very different animals. Do you know the primary differences between the two types of housing? Let's find out. Identify each statement as either a manufactured homes or a modular home. Traditional mortgage financing is difficult to obtain for this type of housing because it is considered personal property instead of real property: Manufactured home They come in single-wide, double-wide, and triple-wide: Manufactured home Because they are built using precise pieces, they are very energy efficient: Modular home They come in either one or two stories: Modular home Regular mortgage financing is available for this type of housing: Modular home

Encroachments vs. Easements

An encroachment is a fixed intrusion onto a person's property. Unlike an easement, which is the authorized use of someone else's property for a specific purpose, an encroachment is unauthorized. For example, if one neighbor builds a fence three feet over her property line, she is encroaching on her neighbor's property. Can you say lawsuit? When an encroachment is discovered during a sales transaction as a result of a survey, it can derail the sale. Powers of negotiation can come in handy in this scenario. Is one neighbor willing to sell a slice of property? Can a fence be torn down overnight? You might be amazed! Helpful Tip: If you think you might have a tendency to mix up the terms "easement" and "encroachment," here's a tip: The word "roach" can be found in encroachment—like roaches, encroachments are uninvited guests. ** You got it! A structure or object illegally encroaches on another's land, whereas an easement is permission to use another's land for a specified purpose.

You represent the buyer in a transaction, and another agent from your firm represents the seller in the same transaction.

Dual Agency

PUDs and MUDs

Fill in the blanks: Terry and Tom are siblings in their early to mid-30s. Terry, the oldest, is married with three kids. She and her husband both work and enjoy living in a community that has everything their family needs in a relatively small area. They live in a planned unit development (PUD). Tom, the younger sibling, lives with his partner above a retail space in a nice neighborhood with a mix of homes and shops. Tom and his partner live in a mixed-use development (MUD).

PUD

I didn't want to mention it to my mother, because she probably wouldn't understand and would say I was either smarting off or off my rocker-I'm always one of those two things as far as Mom is concerned-but she lives in a PUD . A PUD is a planned unit development , which is also mixed use with both residential and commercial in the same building or group of buildings. In her case, it's a retirement community with shopping, recreation, and, of course, the residential units-all in one fell swoop. It has convenience, of course, but also security, which is important for older people like Mom. I talked to a guy at the deli once about PUDs-he was a developer. He says that PUD developers have to file detailed plat maps with their planning boards that show all of the uses they're going to have in the development, because they're planned under special zoning ordinances. But Mom wouldn't understand all that.

Consumer

If Jean weren't involved in the transaction at all, and was just someone who stopped by an open house without making significant contact with you, there is a term for that, too: Jean would be a consumer. Consumers are those who might use a product or service (like an open house) without actually being involved in the transaction in any way. Quiz Example: Someone who uses or purchases a product or service.

Condominiums Recap

In this lesson, we looked at condominiums and their advantages and disadvantages. To recap, condos are distinguishable from other types of housing by the fact that the owner owns a unit within the structure, but not the structure itself or the land, and the structure is an attached, residential building. These are some of the advantages of condo living: - Secure building - No yard work - Potential investment property with option to sublet - Owner is not responsible for upkeep and maintenance of the building These might be considered some of the disadvantages: - Ownership dues - Common area but no private yard

Corporations

Jeb Kawasaki already had a triplex and was getting ready to purchase two small single-family houses. He was a little worried about liability, however, and decided he needed a corporate shield of some kind. He met with an adviser who ran him through the options. If he incorporated, his personal assets would be protected in the event of a lawsuit. However, if he formed an LLC, provided it was managed correctly, again, only the assets owned by the LLC (and none of Jeb's other assets) would be subject to a claim or lawsuit. Jeb liked the freedom that an LLC offered him in the management of his properties. For example, in his LLC operating agreement, he could extend or limit the rights, powers, and obligations of any other members he decided to bring on. Plus, he felt that the formalities of a corporation were a bit over his head—he didn't want to hold annual meetings with himself, for instance! Another plus? For now, because he was the only owner, he might not have to file a separate tax return, and his profit or loss could be included on his personal tax return. In contrast, if he formed a corporation, the corporation would have to file a separate return. "I hate taxes!" Jeb cried. "I'll go with an LLC."

Characteristics of Corporations

Let's pick up with corporations. Remember that corporations hold property in severalty. What are some characteristics of this type of business? Exist only in law (is intangible): characteristic Physical, brick-and-mortar establishment: not a characteristic Shareholders may be taxed at both the corporate and individual level: characteristic Can receive, hold, and transfer title to real property, and may give or hold a mortgage to secure a debt owed to the corporation: characteristic Can exist as a subchapter S corporation or C corporation: characteristic

When it comes to conveying property to a spouse, what does Minnesota allow?

Minnesota doesn't allow dower and curtesy, but allows actions based on these rights.

John and Mattie are a married couple in Minnesota who are currently going through a divorce. How will their marital property be handled?

Minnesota is an equitable distribution state, so their marital property will be divided fairly as determined by a court, but not necessarily equally.

Uh oh! Now imagine the once friendly feud that surfaces between Jack and Joe during football season has reached a new level. Now Jack is forbidding Joe from entering certain rooms in the family home the brothers inherited. Can Jack do this?

No - Tenants in common hold an undivided interest in the entire property. This means each brother has the right to access all portions of the property. Jack cannot prevent Joe from entering areas of the property.

About Deed Restrictions

One way to encumber a property, is through a deed restriction , which is a private agreement that impacts the use of the land. A covenant is a type of deed restriction. Covenants and other deed restrictions are usually placed on the land by the owner when the property is sold, and they may be included in the deed itself. You will often see deed restrictions (which are also known as restrictive covenants) imposed by a developer who wants to maintains specific standards in a subdivision that's still under development. The developer doesn't want early residents in the development to create issues that will impede future sales. For instance, a deed restriction may involve the types and heights of fencing that may be used. Residents may be prohibited from using plastic fencing, parking their recreational vehicles on the street, or placing satellite dishes where they will be in view of the street.

Timeshare Terms

Pieces of real estate owned by multiple, unrelated individuals who occupy the dwelling unit in one- to two-week intervals during the year: timeshare estate. Gives the purchaser the right to possess the property at given times for a given duration, but does not convey ownership: timeshare use. Buyers agree to a one-time purchase price and an annual maintenance fee: vacation ownership. The owner buys the right to use the developer's facilities and may use the designated area at any time during the year: campground membership. There are two formats for timeshares. Which format is the more widely used? Fee simple. (Fee simple, which conveys all the rights of ownership, is more widely used than the right-to-use format, which simply provides the right to occupy the property during a specified time frame.)

Easement Terms

Rights to occupy a property: Possessory rights Easements fall into this category: Non-possessory rights Constructed on boundary line separating two properties: Party wall

Subdivision Terms

Subdivision: Land divided into lots for development Demographics: Social and economic make-up of a community Subdivision plat: Written record of land divided into lots and used in the legal description of deeds Plat book: Collection of written records used in legal subdivision descriptions kept at the county clerk's office Development agreement: Contract between the city and the developer

Zoning Ordinances

Select the two parts of zoning ordinances from these option: Text describing the zoning classifications and the uses permitted within them The zoning map that divides the area into designated districts, such as industrial, commercial, and residential Good job! You've correctly identified the two parts of the zoning ordinances: the zoning map and text describing the zoning classifications and the uses permitted within them.

Unit Exam

Sima purchased a cooperative. When the sale goes through, what will she own? Correct answer: Shares in a corporation Common elements are those parts of a condo complex that belong to _______. Correct answer: All owners Lance purchased a home, but he won't own any real estate—just shares in a corporation. This is because his new home is ______. Correct answer: A cooperative A _______ gives the purchaser the right to possess the property at given times for a given duration but doesn't convey ownership. Correct answer: Timeshare use A _______ is a piece of real estate owned by multiple unrelated individuals who, in addition to their ownership rights, each hold the right to occupy the dwelling unit based on the specific terms of a timeshare agreement, usually in one- to two-week intervals during the year. Correct answer: Timeshare estate Which of the following describes a modular home? Correct answer: Built using precise pieces and very energy efficient Regular home financing is not available for this type of dwelling. Correct answer: Manufactured home In which of the following situations can you sell timeshares without a real estate license? Correct answer: When you're selling your own timeshare Dory owns a condo. What type of ownership does Dory hold in the common elements? Correct answer: Undivided interest Which of the following describes a manufactured home? Correct answer: Traditional mortgage financing is difficult to obtain. Johnnie and Mary each own a unit in a new condominium complex. According to Minnesota law, in which element do they NOT have an undivided ownership interest? Correct answer: Condo units Preston is a condominium developer in Minnesota. He's just signed a sales contract with Brett to purchase one of the first units that will be completed. Which of the following statements must be true? Correct answer: Preston provided Brett with a public offering statement at least 15 days ago.

Timeshare Ownership

TRUE With a right-to-use timeshare, the week or weeks to be used are specified in advance, with buyers of high-season dates paying more than low-season purchasers. FALSE Buyers of vacation timeshares are not allowed to rent, give, or sell their time to others. TRUE Some vacation ownership timeshare plans operate on a "points" system, where the buyers can book vacations in different locations based on the number of points purchased. TRUE Fee simple ownership for a vacation timeshare works in the same way as other types of timeshares: Ownership can be enjoyed, sold, or passed down to heirs. FALSE Unlike other forms of owned real estate, timeshare estates cannot be sold or passed down to heirs. TRUE Resale timeshares often do not recoup the buyers' initial investment.

Madge and Steve are married when they purchase a townhouse. They take ownership under this type of tenancy, which has the right of survivorship. That means if Steve dies, Madge becomes the sole owner of the townhouse. Likewise, if Madge dies, Steve becomes the sole owner. Neither may pledge his or her interest in the property to another without the other spouse joining in the deed. If Madge and Steve divorce, their tenancy would end automatically by divorce decree, and they would become tenants in common. What type of ownership do Madge and Steve have?

Tenancy by the Entirety

HOA Restrictions in Minnesota

The CC&Rs are comprised of: Conditions: Instances in which property ownership may be lost if a condition is violated Covenants: Agreements between the association and the property owner Restrictions: Limitations imposed by a developer who wants to maintain specific subdivision standards. The HOA is often established in part to enforce these restrictions.

Joint ventures are a unique organization. Which of the following scenarios best describes a joint venture?

The once-thriving Sunny Springs neighborhood has fallen on some hard times, but the residents won't let that bring them down. In an effort to restore the neighborhood to its former glory, the residents are joining together to buy abandoned properties, rehab them into livable houses, and sell them to new owners. This is an example of a joint venture. Two or more people come together for the single, temporary purpose of buying real estate, improving the properties, and selling for a profit.

Meet Tito

They'd been friends in college. The smartest one in the group—Tito Textbook, they called him, but his real name was Tito Fuego—had a thing for facts and figures. During one spring break, Tito, Catherine, and Wes had all gone to Vegas. Starting with just $20, Tito had won $1,200 at the blackjack table. He knew which cards had been played and memorized them, playing the odds. Now Tito was buying and selling real estate. He seemed to have a knack for that, too, and asked his friends, and all of their relatives and friends (200 people in all), if they'd like to invest in his next purchase—a strip mall he'd had his eye on. He assured them they would make at least 22% on their investment within eight months. One hundred and fifty people said yes! Tito would keep them informed as to the progress of their investment. Question: Which type of organization best describes Tito's scenario? -- SYNDICATE You got it! Syndicates are organizations with many participants with the common purpose of making a profit from a real estate investment.

Do you recall in which common ownership property a corporation owns the property itself? Take a look at the resource that talks about a cooperative and a condominium project. Then identify whether the following are characteristics of cooperative versus condominium ownership.

Title to land and building is held by a corporation: Cooperative Ownership Title to unit held by unit owner: Condominium Ownership Personal property: Cooperative Ownership Real property: Condominium Ownership Ownership may be transferred similar to other properties: Condominium Ownership Ownership may follow occupancy agreement and can be approved/disapproved by the board: Cooperative Ownership ** Great work differentiating cooperative from condominium ownership. Who knew there were so many different types of ownership, huh?

MUD

When I told my family I now lived in a MUD , my mother said, "That doesn't surprise me, Nellie. You never did have sense enough to come in out of the rain." I had to explain to her that MUD stood for mixed-use development . Basically, I live in an apartment above retail space. It's convenient to shopping and mass transit, and I really feel like I'm in the thick of things here

Where to Find Legal Descriptions

Why do we need to describe land by legal description? Can't we just use the street address and be done with it? Street addresses are fine for giving someone directions to your dinner party. Legal descriptions are necessary because street addresses can change and are an insufficient description of a property and its boundaries. Street addresses merely identify location, not the parameters of the land. Legal descriptions are used to identify property and describe it in legal documents, such as deeds and mortgages. Surveyors use legal descriptions to locate and identify parcels of land. To have a legally sufficient description of property—one that will stand up in a court of law if the need arises—only a legal description will do.