TENNESSEE AGENCY LAW REQUIREMENTS FOR AGENTS WORKING AS SELLER AGENTS
IF IT IS YOUR INTENTION TO LIST A SELLER'S PROPERTY AS A LISTING SALES ASSOCIATE FOR YOUR REAL ESTATE COMPANY:
You will be representing the SELLER as a CLIENT of your Real Estate Company. The Company, your Broker and you will be the SELLER'S AGENT.
After telling the SELLER about your Company and yourself, the services you provide and how your Company and you will market the SELLER'S property, according to TCA 62-13-405, you must verbally disclose to the SELLER your status (how you will be working as the SELLER'S AGENT) in the transaction before any real estate services are provided.
"Mr. Seller I wish to represent you as a SELLER'S AGENT. As your AGENT there are two special duties I will owe only to you under Tennessee Law (TCA 62-13-404)":
· OBEDIENCE – I will obey all of your lawful instructions within the scope of our agency agreement.
· LOYALTY – I will be loyal to your interests and place your interests above all others involved in any transactions or activities except where such loyalty duly to you would violate my required duties to a customer.
"Mr. Seller, as your Agent, I will owe to you and everyone involved with us in any transaction or activities involving your property the following duties under Tennessee Law (TCA 62-13-403)":
· I will use professional skill and care in providing services.
· I must disclose to everyone any adverse facts, conditions or occurrences that have a negative impact on the value of your property, anything that reduces the structural integrity of your property and anything that presents a significant health risk to any one who would occupy your property.
· I will maintain the confidentially of all information you give me other than anything that I must disclose under the Law.
· I will provide services to you and to everyone with honesty and good faith.
· I will provide timely and accurate information by request on market conditions related to a transaction.
· My Company and I will account for any and all earnest money deposits and other property received from you or anyone else involved in a transaction.
· I will not engage in self-dealing. I will not have any conflicts of interest. I will not represent a family member or other entity in which I have an interest without prior disclosure to you. If I recommend to you the use of another business in which I have an interest or from whom I may receive a referral fee, I will give you proper disclosure.
"Mr. Seller, I am require by Law (TCA 62-13-405) to have you sign a DISCLOSURE FORM stating that I have given you all of this information before I can execute a Listing Contract with you. Please sign my Company's Disclosure Form."
[ NOTICE - THERE IS NO STANDARD OR OFFICIAL FORM REQUIRED BY TENNESSEE LAW. THE LAW REQUIRES ONLY THAT YOU HAVE A WRITTEN DISCLOSURE. USE WHATEVER FORM YOUR BROKER REQUIRES. USING A FORM WHICH LISTS THE REQUIRED DUTIES OWED TO THE CLIENT AND ALL PARTIES WOULD GIVE THE AGENT ADDITIONAL PROTECTION IN COURT.]
With the AGENCY DISCLOSURE FORM and LISTING CONTRACT in hand, DO WHAT YOU HAVE TOLD YOUR CLIENT YOU WOULD DO!
INFORMATION YOU MUST DISCLOSE TO YOUR SELLER CLIENT AND ALL OTHER PARTIES IN A TRANSACTION:
· Other Agency relationships ("I currently represent other SELLER CLIENTS, BUYER CLIENTS"; those real estate companies and agents you do not cooperate with.)
· Company Polices, Company Policy and Procedures for changing Agency Relationships. How you will handle IN-HOUSE Transactions (DESIGNATED AGENCY, DUAL AGENCY, defaulting to FACILITATOR/TRANSACTION BROKER).
· Sources of financing and Sources of compensation.
INFORMATION YOU MUST DISCLOSE TO YOUR SELLER CLIENT:
· All information you can obtain about the Customer/Buyer.
· The identity of the Customer/Buyer.
· All offers to purchase.
· The willingness of the Customer/Buyer to complete the sale.
· The ability of the Customer/Buyer to offer a higher price.
· The Customer/Buyer's intentional use of the property.
· You cannot disclose any information that might weaken your CLIENT'S ability to obtain the most favorable terms in a transaction.
WORKING WITH OTHER REAL ESTATE LICENSEES AS A SELLER'S AGENT:
Under Tennessee Law (TCA 62-13-405), upon initial contact with any other Licensee involved in a transaction with you, you must disclose your SELLER AGENT status. This is a VERBAL Disclosure.
The Law does not require it to be in writing. Other Licensees must verbally disclose to you their agency or non-agency status at initial contact. If, at anytime, any Licensee's status changes during involvement
in a transaction with you, that Licensee must immediately tell you of the change. Written Disclosure of this change is only required between the Licensee and the person with whom the Licensee is working ( the customer or buyer ). Under the Law, you are only responsible for disclosing YOUR OWN agency relationship in a transaction, not the status of any other Licensee in the transaction.
THERE IS NO REQUIREMENT NOR PROVISION IN THE LAW FOR Licensees or Real Estate Companies to pass back and forth at the time of negotiating an Offer to Purchase, a Disclosure Form to be signed by all Licensees and parties involved.
While some Licensees and Companies may DESIRE a written disclosure from everyone involved in a transaction, this DESIRE is not a requirement and cannot impede the negotiation or completion of a transaction.
THERE IS A REQUIREMENT IN THE REALTORS® CODE OF ETHICS FOR "REALTORS®, acting as agents of, or in another relationship with, buyers or tenants, shall disclose that relationship to the seller/landlord's agent or broker at first contact and shall provide written confirmation of that disclosure to the seller/landlord's agent or broker not later than execution of a purchase agreement or lease." ( Article 16 - Standard of Practice 16-10 )
WORKING WITH CUSTOMERS / BUYERS AS A SELLER'S AGENT:
When a Customer/Buyer approaches you concerning a Listing where you are a SELLER'S AGENT:
· If the Customer/Buyer is not represented by another Licensee, you must disclose to that Customer/Buyer your status as the SELLER'S AGENT. You would inform the Customer/Buyer of the duties that the Tennessee Law requires you to give to him. If the Customer/Buyer will sign a Disclosure Form at this time, have him do so. If he refuses to sign a Disclosure Form at this time, inform him that the Law requires that you have a Written Disclosure Form signed prior to assisting the Customer/Buyer in preparing an Offer to Purchase.
· If the Customer/Buyer is represented by another Licensee, then no written agency disclosure is required of you.
SHOULD YOU CHANGE FROM A SELLER'S AGENT TO A FACILITATOR/
TRANSACTION BROKER WHEN WORKING WITH A CUSTOMER/BUYER WHO IS NOT REPRESENTED BY ANOTHER AGENT ON YOUR LISTING?
As a SELLER'S AGENT you have promised to be LOYAL and OBEY your SELLER CLIENT, in addition to the other seven duties required by LAW. Why would you now remove your CLIENT'S two most valuable duties? Put yourself in the SELLER'S position - you obligated yourself to nine specific Agency Duties and to deliver some specific services as HIS AGENT. Now, as his advocate and representative, you are asking if he will allow you to abandon him.
If you work with the CUSTOMER/BUYER as a SELLER'S AGENT, you would owe to him the same seven duties a FACILITATOR/TRANSACTION BROKER would owe to him. You may work with that Customer/Buyer who is not represented by another agent, as your SELLER'S AGENT with a written disclosure stating your status as a SELLER'S AGENT and the seven duties you would owe to that Customer/Buyer. You would then be able to assist a Customer/Buyer in providing information, completing an Offer to Purchase, and presenting that Offer to your SELLER CLIENT as the SELLER'S AGENT.
The only time you would need to change your status from a SELLER'S AGENT to a FACILITATOR/
TRANSACTION BROKER status would be when the Customer/Buyer requested you to represent him as a BUYER'S AGENT. Having already discussed your Company Policy and Procedures for changing agency relationships with your SELLER CLIENT prior to obtaining the Listing Contract, you would now go back to your SELLER CLIENT for his consent to allow you to change your status. If you can convince him, then you may change your status. Your Company Policy and Procedures will dictate how you do this and which agency relationship you may default to - FACILITATOR/TRANSACTION BROKER or DUAL AGENCY
If it is your intention to RERESENT both your SELLER CLIENT and your BUYER CLIENT in the same transaction, you must represent them as a DISCLOSED DUAL AGENT. You cannot REPRESENT them as a SELLER'S AGENT and as a BUYER'S AGENT.
YOU CANNOT WORK AS A SELLER'S AGENT FOR YOUR SELLER CLIENT AND AS A FACILITATOR/TRANSACTION BROKER FOR A CUSTOMER/BUYER IN THE SAME TRANSACTION.
YOU CAN WEAR ONLY ONE "AGENCY HAT" AT A TIME IN THE SAME TRANSACTION.
Presenting and Negotiating Multiple Offers
"When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their clients. This obligation to the client's interests is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly..." ( Article 1 of the REALTORS® Code of Ethics. )
"REALTORS® shall submit offers and counter-offers objectively and as quickly as possible." ( Standard of Practice 1-6 of the REALTORS® Code of Ethics. )
REALTORS® must "Obey all lawful instructions of the client..." and must also "Be loyal to the interests of the client." and "...must place the interests of the client before all others in negotiation of a transaction and in other activities, except where such loyalty would violate licensee's duties to a customer..." ( AGENCY LAW TCA 62-13-404. Duty Owed To Licensee's Clients. )
Perhaps no situation routinely faced by REALTORS® can be more frustrating, fraught with potential for misunderstanding and missed opportunity, and elusive of a formulaic solution than presenting and negotiating multiple purchase offers on the same property. Consider the competing dynamics. Listing brokers are charged with helping sellers get the highest price and the most favorable terms for their property. Buyers' brokers help their clients purchase property at the lowest price and on favorable terms. Balanced against the Code's mandate of honesty is the imperative to refrain from making disclosures that may not, in the final analysis, be in a client's interests.
Will disclosing the existence of one offer make a second potential purchaser more likely to sign a full price purchase offer – or to pursue a different opportunity? Will telling several potential purchasers that each will be given a final opportunity to make their best offer result in spirited competition for the seller's property – or in a table devoid of offers?
What's fair? What's honest? What's to be done? Who decides? And why isn't there a simple way to deal with these situations?
As REALTORS® know, there are almost never simple answers to complex situations. And multiple offer presentations and negotiations are nothing if not complex. But, although there isn't a single, standard approach to dealing with multiple offers, there are fundamental principles to guide REALTORS®.
· Be aware of your duties to your client – both as established in the Code of Ethics and in Tennessee Agency Law.
· The Code of Ethics requires you to protect and promote your client's interests. Tennessee Agency Law spells out nine specific duties you owe to your client.
· The Code of Ethics requires that you be honest with all parties. Tennessee Agency Law spells out seven specific duties you owe to other parties and to other real estate professionals.
· Be aware of your duties to other parties – both as established in the Code of Ethics and in Tennessee Agency Law.
· Remember that the decisions about how offers will be presented, how offers will be negotiated, and ultimately which offer will be accepted, are made by the seller – not by the listing broker. In Tennessee, the seller controls the presentation.
· When taking listings, explain to sellers that receiving multiple, competing offers is a possibility. Explain the various ways they may be dealt with ( e.g. acceptance of the "best" offer; informing all potential purchasers that other offers are on the table and inviting them to make their best offer; countering one offer while putting the others to the side; countering one offer while rejecting the other offers, etc. ).
· Explain the pluses and minuses of each approach ( patience may result in an even better offer; inviting each offeror to make their "best" offer may produce a better offer than what is currently on the table – or may discourage offerors and result in their pursuing other properties ).
· Explain that your advice is just that and that your past experience cannot guarantee what a particular buyer may do.
· Remember – and remind the seller – that the decisions are theirs to make – not yours, and that you are bound by their lawful and ethical instructions.
· If the possibility of multiple offers – and the various ways they might be dealt with – were not discussed with the seller when their property was listed and it becomes apparent that multiple offers may be ( or have been ) made, immediately explain the options and alternatives available to the seller – and get direction from him.
· Be mindful of Standard of Practice 1-6 charge to ". . . submit offers and counter-offers objectively and as quickly as possible."
· While the Code of Ethics does not expressly mandate "fairness" ( given its inherent subjectivity ), remember that the Preamble of the Code has long noted that ". . . REALTOR® has come to connote competency, fairness, and high integrity . . .". If a seller directs you to advise offerors about the existence of other purchase offers, fairness dictates that all offerors or their representatives be so informed. ( If a seller client instructs you to reveal or share the terms and conditions of other purchase offers with multiple offerors, you should ask the seller client to put those instructions in writing. It is neither against the Code of Ethics nor Tennessee Law to follow the seller client's legal and lawful instructions. )
· Article 3 calls on REALTORS® to ". . . cooperate with other brokers except when cooperation is not in the client's best interest." Implicit in cooperation is forthright sharing of information related to cooperative transactions and potential cooperative transactions. Much of the frustration that occurs in multiple offer situations results from cooperating brokers being unaware of the status of offers they have procured. Listing brokers should make reasonable efforts to keep cooperating brokers informed.
· Realize that in multiple offer situations only one offer will result in a sale and one ( or more ) potential purchasers will be disappointed that their offer was not accepted. While little can be done to assuage their disappointment, fair and honest treatment throughout the process; coupled with prompt, ongoing and open communication, will enhance the likelihood they will feel they were treated fairly and honestly.
THE SELLER'S PERSPECTIVE
Selling your home can be difficult - especially when you're not sure who is involved. You need to understand the you're your REALTOR® can play in a real estate transaction-- seller's agent, buyer's agent, dual agent or transaction broker. The more informed you are, the better choices you'll make, and the sooner you'll sell your home!
To help you understand your choices, this information answers many basic questions. For in-depth answers to your specific situation, talk with your REALTOR® and ask about individual and local practices to aid you in hiring a real estate professional.
· Your REALTOR®, using the many resources available, can often obtain a greater purchase price for the property than you could by selling it yourself.
· Your REALTOR®, with an interest in bringing both a buyer and a seller together can negotiate a satisfactory agreement between the parties.
· Your REALTOR® does a lot of homework in order to sell your home or property. The property is listed, ads are placed, inquiries are handled and appointments for showing are arranged with your convenience and best interest in mind.
· Your REALTOR® can offer you many suggestions to prepare your property so it looks its best when being shown to a buyer.
· Your REALTOR®, with the aid of the Multiple Listing Service, can list a home or property and work with other REALTORS® to assure a wider range of prospective buyers.
· Your REALTOR® will give you the expertise and service you need to sell your home or property before the first showing and beyond the final sale.
· Your REALTOR® is knowledgeable of the market and gives you the quickest exposure to the maximum number of buyers. Your home is shown only to serious, qualified buyers.
· Your REALTOR® will "qualify" prospects as to their affordable price range and housing needs.
· Your REALTOR® knows current real estate values and can help you set a realistic, competitive price.
· Your REALTOR® is a skilled professional who knows how to merchandise your home effectively.
· Your REALTOR® is familiar with the local home loan market and can help you determine whether seller-assisted financing may expedite your sale.
· Your REALTOR® can figure the net proceeds from your sale, taking into account your outstanding loan balance, closing costs and possible owner financing.
· Your REALTOR® can tap an even larger market through referrals and marketing techniques.
· Your REALTOR® frees you from the problems associated with showing your home - phone inquiries, appointments, showings and negotiations of the contract.
· Your REALTOR® maintains objectivity in presenting offers and counter-offers.
· Your REALTOR® can familiarize you with the closing procedures by explaining them all in advance.
Homeowners attempting to sell their home without the assistance of a REALTOR® generally do so for one reason - to avoid paying a commission fee. Is it worth it? Before making a costly mistake, consider the benefits, from A-to-Z, you receive from working with a trained REALTOR®:
Advertising - The REALTOR® pays all advertising costs.
Bargain - Research shows 77% of sellers said their commission was well spent.
Contract Writing - A REALTOR® can supply standard forms to speed the transaction.
Details - A REALTOR® frees you from handling the many details of selling a home.
Experience and Expertise - In marketing, financing, negotiations and more.
Financial Know-How - A REALTOR® is aware of the many options for financing the sale.
Glossary - A REALTOR® understands and can explain real estate terminology and their meanings.
Homework - A REALTOR® will do homework on how to best market your home.
Information - If you have a real estate question, a REALTOR® will know (or can get) the answer.
Juggle Showings - A REALTOR® will schedule and handle all showings that meet your needs.
Keeps your best interests in mind - It's a REALTOR's® job!
Laws - A REALTOR® is up to date on real estate laws that affect you.
Multiple Listing Service - The most effective means of bringing buyers and sellers together.
Negotiation - A REALTOR® will assist and guide you in all contract negotiations.
Open Houses – One of many marketing techniques.
Prospects - A REALTOR® has a network of contacts that can produce potential buyers.
Qualifies Buyers - Avoid opening your home to "curiosity seekers."
REALTOR - Unlike other licensees, an agent who is a member of the National Association of
REALTORS® and subscribes to a strict Code of Ethics.
Suggested Price - A REALTOR® will do a market analysis to establish a fair price range.
Time - Something a REALTOR® saves you.
Unbiased Opinion - Most owners are too emotional about their home to be objective.
Wisdom - A knowledgeable REALTOR® can offer the wisdom that comes with experience.
X Marks the Spot - A REALTOR® is right there with you through the final signing of papers.
Yard Signs - A REALTOR® provides a professional sign, encouraging serious buyers.
Zero-Hour Support - Selling a home can be an emotional experience. A REALTOR® can help.