Legal FAQ

Q: Am I able to sell mobile homes?

A: Yes, unless it is located in a mobile home park or is being sold from a mobile home dealership. Iowa Code Section 435.26(1)(a) reads "a mobile home which is located outside a mobile home park shall be converted to real estate by being placed on a permanent foundation and shall be assessed for real estate taxes." Therefore, when placed upon a parcel of property, mobile homes are now legally considered part of the property and may be sold as any other type of real property.

Q: Can you accept an offer after you have counter-offered that offer?

A: No. An offer may be accepted, rejected, or counter-offered. A counter-offer terminates the original offer. Unlike a rejection, a counter-offer continues the negotiation and the original offer would have to be elicited again to accept those terms and conditions. Note: any offer may be terminated prior to acceptance (even after it has been offered with a future "must accept by" deadline). The key is that the revocation of the offer must be communicated and notified to the offeree, prior to any acceptance. It is good business practice to document and get in writing a formal revocation.

Q: Which age of housing do the lead paint rules apply?

A: The regulations apply to "targeted" housing as determined by the federal government, which is any housing built prior to 1978.

Q: Must a principal broker also join a board which a salesperson joins as a secondary member?

A: No. An individual salesperson may become a secondary member in any board without the requirement that the designated REALTOR® also become a member in that secondary board. However, MLS services will only be available if the designated REALTOR® participates in the MLS.

Q: What types of transfers are exempt for the seller disclosure of property condition reports?

A: Under Code Section 558A.1, several exemptions apply including the following most commonly inquired about: A transfer which has been ordered by a court (judgment, bankruptcy, eminent domain, foreclosure of real estate mortgage, etc.)

Mortgage company reclaiming a mortgage due to specified reasons.
A transfer by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust
A transfer between joint tenants or tenants in common
A transfer to a spouse, or to a person in the lineal line of kinship
A transfer between spouses in a divorce, separation, or settlement agreement
A transfer to or from the state, a political subdivision of another state, another state, or the United States
A transfer by quitclaim deed

Q: Is a broker responsible for all advertising of property?

Yes. The Code and Administrative laws are replete with clear examples the responsibilities of a sponsoring broker including licensing laws and supervisory requirements. Under rule Chapter 10 salesperson and broker associates are prohibited from advertising under their own name unless they own the property and they are not using their license in any manner. 193E-Chapter 10 clearly places responsibility for all advertising with the broker.

Q: Can you prohibit a licensee from being in attendance when you show a customer a property?

A: No. Iowa Administrative rule 193E-7.15(5) reads, in part, "A licensee shall not refuse to permit a customer to have a customer’s agent present at any step in the real estate transaction, including but not limited to, viewing a property, seeking information about a property listed with such licensee, and no licensee shall refuse to show a property listed by that licensee or otherwise deal with a customer who is represented by another licensee or who requests that the customer’s agent be present at any step in the transaction.

Q: May I disclose if a person living on a property has or had AIDS?

A: No. Under the amended Fair Housing Act, persons with handicaps are protected from discrimination. Individuals who have or have had AIDS are protected by the Act under the handicap classification. Real Estate professionals may not mention the handicap of the individual, unless granted permission from the individual, nor differentiate or practice any discrimination based upon this handicap.

Q: What does the Iowa Code say about licensee property condition disclosures?

A: Under section 558A.4 relating to the seller disclosure of property condition form states the disclosure sheet "… shall include information relating to the condition and important characteristics of the property and structures located on the property, including significant defects in the structural integrity of the structure …."

Besides providing brokerage services honestly and with good faith to all parties in a transaction, under Iowa Code subsection 543B.56( c ) the duties a licensee owes to all parties in the transaction, the licensee shall "disclose to each party all material adverse facts that the licensee knows except:

Material adverse facts known by the party.
Material adverse facts the party could discover through a reasonably diligent inspection, and which would be discovered by a reasonably prudent person under like or similar circumstances.
Material adverse facts the disclosure of which is prohibited by law.
Material adverse facts that are known to a person who conducts an inspection on behalf of the party.

"Material adverse facts" are defined in Iowa Code 543B.5(14) as meaning an adverse fact that a party indicates is of such significance or that is generally recognized by a competent licensee as being of such significance to a reasonable party, that it affects or would affect the party’s decision to enter into a contract or agreement concerning a transaction, or affects or would affect the party’s decision about the terms of the contract or agreement.

For the purposes of the subsection, "adverse fact" means a condition or occurrence that is generally recognized by a competent licensee as resulting in any of the following:

Significantly and adversely affecting the value of the property.
Significantly reducing the structural integrity of improvement to real estate.
Presenting a significant health risk to occupants of the property.

The rule of many cases has weighed upon if the licensee has had "actual" knowledge or notice of a material adverse defect, and if not, would not be culpable. Note however, many other cases have determined that if the licensee has had "constructive knowledge", or "could have" or "should have" known about the defects, they have been found liable for damages. You need to determine if in your judgment as a competent licensee, if any fact is "significant".

Once you have independently determined if you need to disclose a "material adverse fact" as defined above, you then must follow your client’s lawful instructions, and owe loyalty and obedience to the client.

As a licensee, it is a smart risk management technique to disclaim any knowledge of a condition of property other than what is provided on the seller disclosure form. A standard of practice should be to always document your encouragement to any buyer to conduct their own inspection of property they may acquire.

Q: What exactly is procuring cause?

A: If the terms of the brokerage agreement has expired, the listing broker still earns a commission if the broker is the procuring cause of the sale. Citing an Iowa case, a broker is the procuring cause of the sale if negotiations which the broker set in motion between the seller and buyer during the term of the listing continue without abandonment and culminate in a sale. The National Association of REALTORS® has produced a white paper on the various factors which courts throughout the country have relied upon in making their determination of who was the procuring cause of a sale. It is an interesting perspective where the same factors can support and sometime defeat a claim of procuring cause.

Q: Are seller disclosure requirements necessary for new construction?

A: Yes, the requirement is in effect for these properties.

Q: What information is required for closing statements?

A: Under Iowa Administrative Rule 193E—Chapter 13 it is mandatory for every broker to deliver to the seller in every real estate transaction, at the time the transaction is consummated, a complete detailed statement showing all of the receipts and disbursements handled by the broker. Also, the broker shall at the same time deliver to the buyer a complete statement showing all moneys received in the transaction from the buyer and how and for what the same were disbursed. The broker is also required to retain all trust account records and a complete file on each transaction for a period of at least five years after the date of closing which shall include one copy of the listing, any offers to purchase, all correspondence pertinent to the transaction, and the closing statement.

Q: Are there any exemptions to the lead-based paint disclosure requirements?

A: Yes. The lead based paint disclosure requirements are intended for all "target housing" which had construction completed prior to 1978. However some properties are exempt from the disclosure requirements, including:

Property leased for 100 days or less, where no lease or renewal or extension can occur
Zero-bedroom dwellings where a sleeping area is not separated from the living area
Housing for the elderly or disabled where children under the age of 6 are not expected to reside
Purchase, sale, or servicing of a mortgage
Property sold at foreclosure. However, when the property is resold, the regulation does apply
Rental property inspected and found to be lead based paint FREE by an inspector certified under a federal certification program or a federally authorized state certificate program

Q: May you place the term REALTOR® on your tombstone?

A: Yes. According to the National Association of REALTORS® trademark division, there would likely not be a violation if the member was in good standing and the engraved letters are placed in all capitals.

Q: How do I enact a protective clause?

A: To enforce a protective clause beyond the expiration of an exclusive listing contract, there must be a provision for the protective clause in the listing contract which establishes a definite protection period, and the broker MUST furnish to the owner prior to the expiration of the listing the names and contact information of persons to whom the property was presented during the active term of the listing and for whom protection is sought.

Q: Who controls a brokerage agreement?

A: Iowa Administrative Rule 193—Chapter 11 addresses the issues and states "all brokerage agreements shall be in writing and cannot be assigned, sold, or otherwise transferred to another broker without the express written consent of all parties to the original agreement, unless the terms of the agreement state otherwise. Upon termination of association or employment with the principal broker, the affiliated broker associate or salesperson shall not take or use any written brokerage agreements secured during the association or employment. Said brokerage agreements remain the property of the principal broker and may be canceled only by the broker and the client."

Q: How can a buyer submit an anonymous offer to purchase a property?

A: In general, the parties to a contract should be adequately identified and mutually agree to the sale and purchase of the property. A method to submit an anonymous offer would insert the words "buyer to remain anonymous until after acceptance". The key is if the seller would accept the offer as a true manifestation upon the part of the buyer as an intent to be bound to the contract.

Q: How can I change any of these regulations?

A: Many of the rules created by the Iowa Real Estate Commission are directly required under the statutes created by your state Legislators. It is helpful to explain your issues with a brief explanation of the situation, and include possible suggestions for improvement. Also sending comments to the real estate commission or the individual commission members may provide the spark for change. It is good for your business to remain in touch with your representatives.

Q: Does my company need to have a written company policy describing the types of agency relationships the company offers?

A: Yes. The rules are very clear in this matter.
“ The designated broker … or corporation acting as a broker shall have a written company policy that identifies and describes the types of real estate brokerage relationships in which the broker and affiliated licensees may engage…”. (193E--12.1)

Q: Is there a rule requiring licensees to disclose to all parties involved in a transaction who the licensee represents and what duties the licensee owes to each party? Does this need to be signed by all parties?

A: Yes to both questions. The licensee must make an affirmative written disclosure to all parties in the transaction and identify the licensee’s general duties and obligations arising from the agency relationship. You need the signatures of both the buyer and seller. (IA Code 543B.57)

Q: Does my company’s listing agreement have to state what the company’s commission splits are with agents from other companies?

A: No. However, every written brokerage agreement must include a statement disclosing the brokerage policy on cooperating with and compensating other brokerages, including whether the brokerage intends to share the compensation with other brokerages. The exact commission splits
are not required. (193E--11.3(1))

Q: I’m the listing agent and I don’t like the agent representing the potential buyer on my listing. Is there a way I can prevent the buyer from having his or her agent along at a walk through? Is there a way I can negotiate directly with the buyer?

A: No to both questions.

First, a licensee cannot prevent a customer (an unrepresented party or a party represented by another licensee) from having his or her agent present at any step in the transaction. (193E--7.15(5))

Second, a licensee shall not negotiate directly or indirectly with a seller or buyer if the licensee knows, or acting in a reasonable manner should have known, that the seller or buyer has a written unexpired brokerage/agreement for services on an exclusive basis. (193E--11.3(7))

Q: I’ve been hearing about duties owed by licensees to both parties in a transaction. What duties does an agent representing a seller have to a buyer?

A: A seller’s agent is obligated to disclose material adverse facts actually known by the licensee to the buyer (see Question Below for more information on material adverse facts). In addition, a licensee also owes certain duties to all parties in a transaction. These duties are to:

Provide brokerage services to all parties honestly and in good faith;
Diligently exercise reasonable skill and care in providing brokerage services to all parties;
Disclose to each party all material adverse facts that the licensee knows (for exceptions, see Question Below). (543B.56) & (12.3)

Q: I have heard a lot about “confidential information.” If I am representing a seller, what is considered confidential?

A: A seller’s agent must preserve the seller’s “confidential information.” The law considers the following to be “confidential”:

Information that could place the seller at a disadvantage;
Whether the seller is willing to accept less than the asking price;
The seller’s motivating factors;
Whether the seller will agree to terms different from those offered;
The seller’s real estate needs;
The seller’s financial information. (193E--2.1)

Q: A buyer’s agent must preserve the buyer’s “confidential information.” What must the buyer's agent keep confidential?

A: A buyer's agent must preserve the buyer's "confidential information." THe law considers the following to be "confidential":

Information that could place the buyer at a disadvantage;
Whether the buyer is willing to pay more than the asking price;
The buyer’s motivating factors;
Whether the buyer will agree to terms different from those offered;
The buyer’s real estate needs;
The buyer’s financial information. (193E--2.1)

Q: Here’s a difficult, but commonly asked question. The listing I have with my seller expired. However, during the listing period, the seller told me some things about the property that could be considered confidential. I am now representing a buyer and the buyer wants to purchase the property I previously listed. What are my duties and obligations?

A: When an agency relationship terminates, the licensee must keep confidential all information received during the relationship which was confidential by request or instruction from the party they represented. (193E--2.1)

However, the agent also owes a duty to the buyer to disclose material adverse facts actually known by the licensee. Why? The agent owes a duty to disclose material adverse facts to both the buyer and seller regardless of who the agent represents. (543B.56) & (1.43[2])

What must be decided to answer this question correctly is whether the confidential information shared by the seller rises to the level of a material adverse fact (defined below). If the information does rise to the level of a material adverse fact, then the information must be disclosed.

What is a material adverse fact? Under 543B.5(13), a material adverse fact means an adverse fact that a party indicates is of such significance, or that is generally recognized by a competent licensee as being of such significance to a reasonable party, that it affects or would affect the party’s decision to enter into a contract or agreement concerning a transaction, or affects or
would affect the party’s decision about the terms of the contract or agreement. (543B.5(14))

Generally, a material adverse fact is a condition that would:

Significantly and adversely affect the value of the property;
Significantly reduce the structural integrity of the property; or
Present a significant health risk to occupants of the property.

Q: OK, I have a duty to disclose material adverse facts. Are there any exceptions to this rule?

A: Yes. You do not have to disclose the following material adverse facts:

Material adverse facts already known by the party;
Material adverse facts that could be discovered through a reasonably diligent inspection;
Material adverse facts the disclosure of which is prohibited by law (for example, seller has AIDS);
Material adverse facts that are known to a person who conducts an inspection on behalf of the party.(543B.5(14))

Q: What are the new regulations about disclosed dual agency?

A: A dual agent must disclose all material adverse facts known by the dual agent. In addition, a dual agent shall not disclose confidential information, including the following:

Telling the buyer information that would put the seller at a disadvantage;
Telling the seller information that would put the buyer at a disadvantage;
Telling the buyer that the seller will accept less than the asking price;
Telling the seller that the buyer will pay more than the asking price;
Telling the buyer what the seller’s motivating factors are;
Telling the seller what the buyer’s motivating factors are;
Telling the buyer that the seller will agree to financing terms other than those offered;
Telling the seller that the buyer will agree to financing terms other than those offered;
Telling the buyer what the seller’s real estate needs are;
Telling the seller what the buyer’s real estate needs are;
Telling the buyer the seller’s financial information;
Telling the seller the buyer’s financial qualifications. (193E--12.5)

Q: Is there any special language I should include in a dual agency contract?

A: Yes. The Real Estate Commission suggests the following language be included in a dual agency contract:

“ Representing more than one party to a transaction can create a conflict of interest, since both clients may rely upon the broker’s advice, and the clients’ respective interests may be adverse to each other. Brokers endeavor to be impartial between seller and buyer, and will not represent the interest of either the seller or buyer to the exclusion or detriment of the other.” (193E--12.5(2))

Q: What is “appointed agency” all about?

A: Appointed agency is an agency policy in which two agents with the same company have exclusive representation roles. That is, one agent would exclusively represent the seller and one agent would exclusively represent the buyer.

It is called “appointed agency” because under the law, the broker technically “appoints” an agent in his office to exclusively represent the buyer or seller. All the other licensees affiliated with the broker would represent the party on the other side of the transaction.

Remember, appointed agency is an option and companies do not have to offer this option. (12.7)

Example: Bob and Mary are agents of XYZ Real Estate Company and XYZ Real Estate offers appointed agency. Bob has listed a home for a seller. Mary has been showing a buyer properties all over town. After walking through the seller’s home, buyer decides to make an offer. With appointed agency, Bob exclusively represents the seller and Mary exclusively represents the
buyer: This is appointed agency. If XYZ Real Estate Company did not offer appointed agency, XYZ would be a dual agent.

Q: “Appointed agency” sounds simple. Should my company offer this representation option?

A: Understanding appointed agency is not difficult. However, implementing an appointed agency policy in your office can be complicated. The option was made available primarily for the large real estate companies located in urban areas.

If your office and your clients are satisfied with dual agency, there probably isn’t a reason to offer appointed agency. If you decide to implement appointed agency, consult an attorney to walk you through the steps and draft the legal forms.

Q: I am the designated broker in my office. I am aware that the designated broker has general supervisory duties over this or her affiliated licensees. If a complaint is brought before the Commission and the complaint alleges my sales agent erred because I did not meet my supervisory responsibilities, what factors will the Commission look at to determine if I met these responsibilities?

A: The rules provide the Commission with guidance on what factors are important. First, the Commission will look at the education and experience of the broker’s affiliated licensee. After this analysis, the Commission will look at the following factors:

Availability of the designated broker to assist and advise;
General knowledge of brokerage-related staff activities;
Availability of quality training programs and materials to licensees and employees;
Supervisory practices in place to review market analysis, sales contracts, listings, etc.;
Frequency and content of staff meetings;
Written company policy manual for licensees and employees;
Ratio of supervisors to licensees/employees; and
Assigning experienced licensees to work with new licensees. (193E--7.10)

Q: Is there any requirement that the designated broker must distribute regulations and other regulatory information to his or her agents?

A: Yes. “The designated broker shall disseminate in a timely manner, to licensed employees and independent contractors, all regulatory information by the brokerage pertaining to the practice of real estate brokerage. (193E--7.13(3))